We are looking at the First Time Home Buyers amount; a $5,000 non-refundable tax credit that can save you up to $750.
Tax Myth: The First Time Home Buyer’s tax credit is based on your percentage ownership of the property
That is incorrect. Last year, we talked to a young couple that recently purchase a home. On the “tax advice” of their lender, they were told that the First Time Home Buyer’s tax credit is based on their percentage ownership. The lender recommended the transaction be structured to put one spouse as 99% owner with the other spouse at 1%. The misleading recommendation, we were told, was because one spouse already owned and continues to own a property.
Sadly, none of the advice they were given was true and the taxpayers were surprised to learn that they did not qualify for the tax credit. Further, they also learned that a spouse can claim the First Time Home Buyers tax credit without evening owing the property at all! That is of course, if you meet the other qualifications.
One of the eligibility requirements is that you OR your spouse could not have owned a property within the four tax years preceding the purchase. So, in the case of our new friends, they were not entitled to the credit they claimed on their tax return and were looking at a $750 bill from the Canada Revenue Agency.
You wouldn’t take legal advice from your mechanic, so why would you take tax advice from a lender? Chartered Professional Accountants are Canada’s only accounting professionals and are your best source for reliable tax advice. If you have questions about the First Time Home Buyers amount or just need reliable tax advice, give us a call today!