Tax Guide for First-Time Home Buyers in Canada

First Home Savings Account (FHSA)

The First Home Savings Account, introduced in 2023, is the most powerful savings tool for prospective first-time buyers. It combines the best features of the RRSP and the TFSA:

• Tax deduction: Like an RRSP, contributions are deductible from income.
• Tax-free withdrawals: Like a TFSA, qualifying withdrawals (for a first home) are completely tax-free.
• No repayment: Unlike the HBP (below), there is no repayment obligation after withdrawal.

Limits and rules

• Annual contribution limit: $8,000
• Lifetime contribution limit: $40,000
• Unused room carries forward by one year only — if you contribute $5,000 in year 1, you can contribute up to $11,000 in year 2 (the $3,000 unused plus the $8,000 annual limit)
• The account must be opened by a Canadian resident who has not lived in a home they owned in the current calendar year or in the four preceding years
• The FHSA must be used within 15 years of opening, or by age 71, whichever comes first. Unused funds can be rolled over to an RRSP or RRIF without affecting existing contribution room.

Open it before you need it

Room accumulates only once the account is open. If you open an FHSA today and contribute nothing, you accumulate $8,000 in room per year. If you wait two years and then open it, you cannot retroactively claim that room. Open the account as soon as you are eligible — even if you are not actively saving toward a home yet.

Home Buyers' Plan (HBP)

The Home Buyers' Plan allows first-time buyers to withdraw from their RRSP to purchase or build a qualifying home — without the withdrawal being taxed at the time.

2025+ limits

The withdrawal limit increased to $60,000 per person in 2024. Two qualifying buyers purchasing together can withdraw up to $120,000 combined.

Repayment rules

You must repay the withdrawn amount back into your RRSP (or a spousal RRSP) over 15 years, starting the second year after the year of withdrawal. For example, if you withdrew in 2025, repayments begin in 2027. Each year, your repayment schedule requires 1/15th of the total withdrawn. If you do not make the required repayment in a given year, that year's required repayment amount is added to your taxable income — effectively making it a taxable RRSP withdrawal.

Eligibility

You must be a first-time home buyer (same 4-year lookback as the FHSA). The funds must have been in your RRSP for at least 90 days before withdrawal — you cannot contribute to an RRSP and immediately withdraw under the HBP. The home must be your principal residence and you must intend to occupy it within one year of acquiring it.

First-Time Home Buyers' Tax Credit (HBTC)

The Home Buyers' Tax Credit is a non-refundable federal tax credit available in the year you purchase a qualifying home.

• Credit amount: 15% × $10,000 = $1,500 federal tax credit
• Available to first-time home buyers, or any buyer who acquires a home for a related person who is eligible for the Disability Tax Credit
• The credit can be split between spouses/partners, as long as the combined claim does not exceed $10,000
• Claimed on line 31270 of your T1 return

Most provinces have matching or complementary first-time buyer credits. Ontario's Land Transfer Tax rebate (up to $4,000) is a refundable credit against the Ontario LTT owing, and BC's Property Transfer Tax exemption for qualifying first-time buyers provides similar relief.

GST/HST New Housing Rebate

New homes (including newly constructed homes, substantial renovations, and homes purchased from a builder) are subject to GST/HST. The New Housing Rebate returns a portion of that tax to eligible buyers.

Federal rebate

• Applies to homes with a fair market value under $450,000
• Rebate: 36% of the 5% GST paid, on the first $350,000 of home value (maximum rebate: $6,300)
• Phases out between $350,000 and $450,000; no federal rebate above $450,000

Ontario provincial rebate

Ontario provides a 75% rebate of the 8% provincial portion of HST on new homes, with a maximum provincial rebate of $24,000. There is no value cap on the Ontario new housing rebate (unlike the federal portion). Combined federal and Ontario rebate on a $500,000 new home could save $22,000–$30,000 depending on the purchase structure.

Important note on builder assignments

Many builders factor the rebate into their purchase price, requiring buyers to assign the rebate back to the builder. If you intend to claim the rebate yourself, this must be negotiated before signing the agreement of purchase and sale. Your lawyer should review this as part of closing.

Land transfer tax

Every province except Alberta and Saskatchewan charges a land transfer tax (or equivalent) when property changes hands. The tax is calculated on the purchase price.

Ontario rates (as an example)

Toronto adds a second land transfer tax at nearly the same rates. On a $700,000 Toronto purchase, combined LTT could exceed $22,000.

First-time buyer rebates

Ontario first-time buyers receive a rebate of up to $4,000 on the Ontario LTT (eliminating the tax on the first ~$368,000 of purchase price). Toronto first-time buyers get an equivalent municipal LTT rebate of up to $4,475. In BC, the property transfer tax (1% on the first $200,000, 2% up to $2 million) is fully exempt for first-time buyers on homes valued under $835,000.

Principal residence designation: start thinking about it now

When you buy a home, you should understand the principal residence exemption (PRE) even before you think about selling. The PRE is what shelters capital gains on your home from tax when you eventually sell.

You can only designate one property per year per family unit as your principal residence. If you already own a cottage or investment property, the years you designate the new home also use up years that could shelter the cottage or other property.

This is especially important for couples who own multiple properties — which years to designate which property is a strategic decision that should involve a tax professional before any sale.

See our full guide to selling your home for a complete explanation of the PRE, the flipping rule, and CRA reporting requirements.

Home office deductions for homeowners

If you work from home — whether as an employee or self-employed — you may be able to deduct a portion of your home expenses against your income.

• Employees: Claim actual expenses (heat, utilities, maintenance, property taxes, mortgage interest) on Form T777 if your employer requires you to work from home and issues a signed T2200. You can deduct the workspace portion (square footage of dedicated workspace ÷ total home square footage × eligible expenses).
• Self-employed: Similar calculation on T2125 Part 7. Deductible against business income only; cannot create a loss (excess carries forward).

Note that for homeowners, mortgage principal repayments are not deductible — only mortgage interest is a deductible home expense. Rent, property taxes, and utilities are deductible in proportion to the workspace usage.

Frequently asked questions