Getting Ready to Buy Your First Home in Canada: How to Make the Most of Government Programs and Tax Benefits
- rod6555
- Nov 21
- 4 min read
Purchasing your first home is one of the biggest financial milestones in life, and for many Canadians, it’s both exciting and overwhelming. Fortunately, the Government of Canada offers several programs and tax measures designed to help first-time buyers save for their down payment and reduce their taxes. To take full advantage of these opportunities, it’s important to understand how each of them works and plan accordingly.
The First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a registered account designed to help Canadians save for their first home. To open an FHSA, you must:
Be a resident of Canada.
Be at least 18 years old.
Be a first-time home buyer, meaning you have not owned a home in which you lived during the year you open the account or the four preceding calendar years.
You can contribute up to $8,000 per year, with a lifetime limit of $40,000. Contributions to an FHSA are tax-deductible, which means they reduce your taxable income for the year—similar to an RRSP contribution. When it’s time to purchase your first home, withdrawals made for that purpose are completely tax-free.
Unlike the RRSP Home Buyers’ Plan (HBP), funds withdrawn from an FHSA for a qualifying home purchase do not need to be repaid over time. However, it’s essential to note that contributions to an FHSA must be made by December 31 of the calendar year to qualify as a deduction for that same year. There is no 60-day grace period like there is for RRSP contributions.
The Registered Retirement Savings Plan (RRSP) and the Home Buyers’ Plan
The Registered Retirement Savings Plan (RRSP) has long been a tool for Canadians to save for retirement, but it also plays a role in saving for a first home. Anyone with earned income can open an RRSP. The contribution room available each year equals 18% of your previous year’s earned income, up to an annual maximum set by the CRA.
Under the federal Home Buyers’ Plan (HBP), first-time home buyers can withdraw up to $35,000 from their RRSP to put toward the purchase of their first home without immediate tax consequences. For couples, this means up to $70,000 can be accessed.
However, there are a few important rules to keep in mind:
The withdrawn amount must be repaid into your RRSP over 15 years, with annual payments required to avoid having the amount added back to your taxable income.
Only RRSP contributions that have been on deposit for at least 90 days are eligible for the HBP withdrawal.
Contributions can be made up to 60 days into the following year to count toward the previous tax year.
Like the FHSA, RRSP contributions reduce your taxable income, potentially leading to a lower tax bill or a higher refund.
The Home Buyers’ Amount (HBA)
In addition to savings programs, first-time buyers may also benefit from the federal Home Buyers’ Amount, a non-refundable tax credit available that is claimed in your tax return in the tax year when a qualifying home is purchased.
To be eligible, you must:
Be a first-time home buyer, meaning neither you nor your spouse or common-law partner owned and lived in another home during the year of purchase or in any of the four preceding years.
Have purchased a qualifying home registered in your name.
The credit amount is $10,000, and since it is non-refundable, it can reduce the amount of tax you owe or, if you have already paid sufficient tax during the year, increase your refund. Applying the federal rate of 15% to this credit translates into a potential benefit of up to $1,500, depending on your individual tax situation.
Land Transfer Tax Reduction for First-Time Home Buyers in Ontario
In Ontario, first-time home buyers can benefit from a rebate of up to $4,000 on the provincial land transfer tax. This effectively means that for homes priced up to $368,000, the land transfer tax is completely eliminated. For homes above this threshold, buyers receive a maximum rebate of $4,000, reducing the tax payable by that amount.
To qualify for this rebate, the buyer must:
Be at least 18 years old.
Intend to occupy the home as their principal residence within nine months of the transfer date.
Have never owned an eligible home or an interest in such a home anywhere in the world, at any time.
This rebate significantly lowers the upfront closing costs, making it easier to manage cash flow during one of the most critical moments of the home buying process. Additionally, buyers purchasing in the City of Toronto may receive an additional municipal land transfer tax rebate of up to $4,475, meaning total potential savings of up to $8,475 in transfer taxes.
Plan Ahead to Maximize Your Benefits
While these programs are extremely valuable, making the most of them requires thoughtful planning. For example, reaching the FHSA lifetime contribution limit can take several years, so starting early is key. Coordinating your FHSA and RRSP strategies can also maximize your available funds and tax deductions leading up to your home purchase.
Buying your first home is a major life event, and understanding the financial tools available can make the process smoother and more affordable. At GGLR Accounting, we offer expert consultations - available via video call - to help you plan your first home purchase, understand your tax-saving opportunities, and properly claim the deductions and credits you’re entitled to.
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Disclosure: This post is intended for educational purposes only. Readers should consult a qualified professional before implementing any strategies discussed herein.