This is not a credit on a new home but rather a credit for a new buyer of a home – a distinction that is being missed by taxpayers.
All kinds of “homes” qualify – from single family dwellings to mobile homes to condos. And the home can be pre-existing or new construction but must be located in Canada – no Arizona retirement residences allowed. The effective purchase date must have been in 2009 or onward.
For the purchaser to qualify as a “new buyer”, the owner or owners must not have owned a home for the last five years, so for a 2012 home purchase that means the person(s) can’t have lived in an owned home for all of 2008 onward.
And for a 2009 purchase that means not having lived in an owned home for all of 2005.
The five year non-ownership rule is exempted in the case of a purchase of a home by a disabled person who has their life style enhanced by that home. The disabled person must qualify for the Disability Tax Credit Certificate and take occupancy of the new home within one year of the date of purchase. By the way, the New Home Buyer’s Credit flows to the actual purchaser so a child of a disabled parent who purchases a home for the disabled parent receives the credit.
So what is this all worth to the purchaser?
It’s based on $5,000 of purchase value with a credit of 15 per cent of that amount applied toward tax liability. In other words it’s a $750 credit, and it’s a non-refundable credit meaning that only the portion of the credit required to reduce income tax to zero is applicable. The balance is not refunded.
As for paperwork, the completion of the Home Schedule on the tax return is very simple. If asked by CRA, the owner or owners will have to prove the date of purchase.
However, the required proof of five year non-ownership is unclear.
If you are just hearing of this credit for the first time and you were a new buyer of a qualifying home sometime since 2009, have no fear.
A T1 adjustment can be filed for the year it was purchased.
Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.netron.