Homeowner and First-Time Buyer Tax Credits in Canada: What May Help
The problem is that home-related tax rules are not always simple. A credit is not the same as a deduction. A rebate is not the same as a grant. And a program that helped one buyer a few years ago may have changed by the time you are ready to use it.
Still, there are several federal tax measures that homeowners and first-time buyers should know about.
This is a general overview, not personal tax advice. Rules, eligibility, and amounts can change. Before relying on any program, speak with a qualified tax professional and check the current Canada Revenue Agency information.
First-Time Home Buyers’ Tax Credit
The First-Time Home Buyers’ Tax Credit is one of the better-known tax measures for people buying their first home.
Eligible buyers can claim up to $10,000 under the federal Home Buyers’ Amount. Because it is a non-refundable tax credit, it can reduce the income tax you owe. For many eligible buyers, the maximum value is up to $1,500.
You may qualify if you buy a qualifying home in Canada and meet the first-time buyer rules.
In general, you are considered a first-time buyer if you did not live in a home owned by you, your spouse, or your common-law partner during the current year or the previous four calendar years.
There is also an important exception. A person eligible for the Disability Tax Credit, or someone buying a home for a related person who is eligible, may be able to claim the credit without meeting the usual first-time buyer requirement.
Keep your purchase documents.
You may not need to send them with your return, but you should have them available in case the CRA asks.
A New GST/HST Rebate for Eligible First-Time Buyers
This is one of the biggest changes for buyers looking at new construction.
Eligible first-time home buyers may be able to recover up to 100% of the GST, or the federal portion of HST, paid on a new or substantially renovated home valued at $1 million or less.
The maximum rebate can be as much as $50,000.
For homes priced between $1 million and $1.5 million, the rebate gradually decreases. Homes priced at $1.5 million or more are not eligible for this specific first-time buyer rebate.
The rules are detailed.
The home generally needs to be your primary residence. You need to meet the federal first-time buyer definition. Timing matters too, including when you signed the agreement, when construction started, and when you take possession.
This can also apply in some cases where you build your own home or substantially renovate one.
If you are considering a new PEI home, talk with your builder, lawyer, mortgage professional, and tax advisor early. Do not assume a rebate is already included in the advertised price.
The First Home Savings Account
The First Home Savings Account, often called an FHSA, is not a tax credit.
It is a registered savings plan designed for eligible first-time buyers.
You can generally contribute up to $8,000 in the first year you open an FHSA, with a lifetime contribution limit of $40,000. Contributions are generally tax deductible, similar to RRSP contributions.
If you later make a qualifying withdrawal to buy or build your first home, the withdrawal can be tax-free.
That gives first-time buyers something valuable: a chance to receive a tax deduction when they save and avoid tax when they use the savings for a qualifying home.
It can be especially useful for someone who is not ready to buy this year but wants to begin building a down payment.
The Home Buyers’ Plan
The Home Buyers’ Plan is another option for first-time buyers.
It allows eligible buyers to withdraw money from their RRSPs to buy or build a qualifying home. The current maximum withdrawal is $60,000 per person.
Unlike a normal RRSP withdrawal, the money is not immediately taxed if you meet the program conditions.
But it does need to be repaid over time.
That is an important difference between the Home Buyers’ Plan and an FHSA. An FHSA qualifying withdrawal does not need to be repaid. A Home Buyers’ Plan withdrawal does.
Some buyers use both programs.
Whether that makes sense depends on your savings, income, tax situation, and long-term plans.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit can help eligible homeowners who renovate a home to improve accessibility, safety, or mobility.
It may apply when renovations are completed for a person who is 65 or older or who is eligible for the Disability Tax Credit.
Eligible expenses can include certain permanent changes such as ramps, walk-in showers, grab bars, accessible bathroom improvements, widened doorways, and other renovations that make it easier to enter, move around, or function safely in the home.
The credit allows up to $20,000 in eligible expenses each year.
This is a non-refundable credit, which means it reduces tax payable. It is not a cheque for the full amount spent.
Keep detailed invoices, proof of payment, contracts, permits, and records of what work was completed.
Multigenerational Home Renovation Tax Credit
Families are increasingly looking for ways to create space for aging parents, adult children, or relatives with disabilities.
The Multigenerational Home Renovation Tax Credit may help when a renovation creates a self-contained secondary unit inside or attached to an eligible home.
The unit must be intended for a senior family member or an adult who is eligible for the Disability Tax Credit to live with a qualifying relative.
Eligible homeowners can claim up to $50,000 in qualifying renovation costs. The refundable credit is worth 14.5% of eligible expenses, up to a maximum of $7,250 for each qualifying renovation.
This can be useful for projects such as adding a legal suite, creating a separate entrance, building an accessible bedroom and bathroom area, or converting part of a home into a self-contained living space.
Not every renovation qualifies.
The unit needs to meet specific requirements, so get professional advice before you begin a major project based on the expectation of receiving the credit.
Rental Properties: Expenses May Be Deductible, But Rules Matter
If you earn rental income, you may be able to deduct reasonable expenses you incur to earn that income.
Common examples may include mortgage interest, property taxes, insurance, utilities you pay for, repairs, advertising, property-management fees, and some professional fees.
But not every cost is handled the same way.
Routine repairs are usually treated differently from major improvements. Replacing a broken fixture may be a current expense. Adding a major new deck, replacing an entire roof, or completing a substantial renovation may be a capital expense instead.
The distinction matters.
It can affect when and how you claim the cost, and it may also affect your taxes when you eventually sell the property.
Short-term rentals have additional rules. If a short-term rental is not compliant with local laws and licensing requirements, related income-tax deductions may be denied.
Keep good records from the beginning.
Do Not Forget About the Sale of Your Home
Most Canadians can usually claim the principal residence exemption when they sell their primary home.
But the sale still needs to be reported on your tax return.
This is an area where people can get caught off guard. Even if the gain is fully exempt, failing to report the sale properly can create problems later.
The rules can become more complicated if the property was partly rented out, used for business, owned for a short time, inherited, held in a trust, or changed from a rental property to a principal residence.
When in doubt, ask a tax professional before you sell.
What About the Underused Housing Tax?
The Underused Housing Tax caused confusion for many property owners after it was introduced.
The rules have changed.
For 2025 and later calendar years, affected owners generally do not need to file a UHT return or pay the tax. However, there may still be filing requirements or unresolved issues for the 2022, 2023, and 2024 calendar years.
This is especially important for people who own property through a corporation, partnership, trust, or another legal arrangement.
Do not assume the rules apply the same way to every type of owner.
Andrew’s Advice: Plan Before You Spend
“Tax credits and rebates can be helpful, but they should not be the reason you buy a home or start a renovation,” says Andrew Brown, Broker Owner of CENTURY 21 Northumberland Realty. “Buyers and homeowners should first make sure the property and the project fit their budget. Then they can look at what tax programs may help.”
That is the right approach.
A tax credit can improve the numbers.
It should not be used to justify a home or renovation you cannot comfortably afford.
Keep Your Records
For any home purchase, sale, renovation, or rental property, keep your documents.
That includes purchase agreements, legal statements, invoices, permits, contracts, receipts, proof of payment, mortgage documents, and records of major improvements.
You may not need everything right away.
But years later, when you sell, claim a credit, or need to answer a CRA question, you will be glad you kept it.
A little organization now can save a lot of stress later.
Sources
The following sources were used to help prepare and fact-check this article.
Government of Prince Edward Island — Property Taxes and Charges
Used for PEI-specific information about annual property taxes, municipal taxes, fire district charges, provincial tax credits, payment dates, and other charges that may appear on a homeowner’s property tax bill.
Gov’t of PEI and Property Taxes and Charges
Canada Revenue Agency — Principal Residence
Used for federal tax guidance concerning the principal residence exemption and the requirement to report the sale of a principal residence on an income tax return.
CRA and the Principal Residence Exemption
Canada Revenue Agency — Home Buyers’ Amount
Used for information about the federal Home Buyers’ Amount, including qualifying homes, eligibility requirements, first-time buyer rules, and how the credit is claimed.
CRA and the Home Buyers’ Amount
Canada Revenue Agency — Rental Expenses You Can Deduct
Used for guidance relevant to homeowners who rent out all or part of a property, including the distinction between current and capital expenses and the types of reasonable expenses that may be deducted from rental income.
