Toronto First Time Home Buyer Incentives

If you’re a first time home buyer in Toronto, several mortgage-related incentives can help. These incentives, taken individually, can make a difference in your purchase. However, taken together, they can significantly transform affordability and result in many thousands in savings.

RRSP Home Buyer Plan

The RRSP home buyers plan allows up to 2 first time buyer applicants to access up to $35,000  of RRSP room each for down payment purposes.

The benefit of purchasing an RRSP is that income is reduced for taxation purposes. However, when using these funds for down payment to purchase your home, no tax is paid on the resulting sale of the RRSPs. Typically, taxes are to be paid when RRSP are sold but not when using the Home Buyers Plan.

TFSA Home Buyer Account

The TSFA Home buyer account is similar to the RRSP home Buyers Plan in that it reduces taxable income for the year. This is interesting, as typically, purchasing a TFSA does not reduce taxable income. For this plan, however, it does reduce taxable income. 

If you don’t contribute to the maximum $8,000 in 2023, the limit carries over to the next year, but the carry over only lasts for 1 year. To get the full 5 years/ $40,000 benefit, you would need to contribute each year for 5 years, other than the 1 year carry forward flexibility.

One consideration is if your taxable income will be higher in 2024, given a higher marginal tax rate in 2024 as a result of your raises, the contributions in 2024 should result in a higher tax savings. Remember, you can only carry forward for 1 year.

Unlike the FTB RRSP plan, you don’t need to re pay/ re contribute over 15 years. 

If you don’t use the funds within 10 years, you can transfer to your RRSP on a tax-free basis.   

The downside is, that if you withdraw funds not used for purchasing your first home (or don’t transfer to your RRSP), this would count as taxable income and you would lose this contribution room for future home buying purposes.

Your funds should not be locked in, as long as you don’t purchase a limiting financial product (ie. a closed GIC, mutual fund with front or back end ‘loads’ etc..).

Land Transfer Tax Rebate

The land transfer tax rebate is $4000 for the Ontario portion, and in the City of Toronto proper, there is an additional $4475 of rebate. This extra rebate exists because the City of Toronto charges an additional land Transfer tax. The rebate is instant an dis applied by the lawyer at closing.

First Time Buyer Tax Credit

Remember to keep your home buying receipts and expenses handy for tax time. You should be eligible fora $750 tax credit. Generally speaking, legal expenses and other closing costs involved with buying a home should qualify you. However, check with your income tax preparer for more information.