The First Time Home Buyers Program in BC is a tax credit that allows qualified first-time homebuyers to eliminate or reduce their property transfer tax (PTT) liability on a home purchase.
When you buy a home in BC, you’re required to pay the PTT.
When you register your property with the Land Title Office, your legal representative must concurrently file a PTT return, and you must pay the amount owing.
Your PTT obligation is based on the fair market value of your home and comprised of four brackets:
- 1% on the value up to and including $200,000
- 2% on the value above $200,000 and up to and including $2 million
- 3% on the value above $2,000,000 and up to and including $3 million
- 2% on the value above $3 million.
Under the First Time Home Buyers’ Program, you’ll be exempt from paying the entire PTT charged on your home purchase if its value is $500,000 or less.
The exemption translates to a maximum of $8,000 in tax savings ($200,000 x 1% + $300,000 x 2%).
As you can see, the PTT is a major outlay that can significantly add to the already high cost of acquiring a home.
By enrolling in the BC First Time Home Buyers Program, you can realize substantial cost savings that will ease the financial burden of homeownership.
Qualifying for the First Time Home Buyers Program
To qualify for the First Time Home Buyers program in BC, you must:
- Be a Canadian citizen or permanent resident.
- Have lived in BC for a minimum of one year or filed at least two income tax returns during the past six years as a BC resident.
- Have never owned a property that was your principal residence anywhere in the world.
- Have not previously received a first-time home buyers’ exemption or refund.
Additional criteria apply to your property:
- You must intend to use it as your principal residence.
- Its fair market value must be $500,000 or less
- It must be no greater than 0.5 hectares in size.
Applying For The First Time Home Buyers Credit
To apply for the PTT exemption, you must declare that you’re a first-time home buyer and show that you meet all the eligibility requirements.
You provide these details on your PTT return, which your lawyer will complete and submit on your behalf.
Once the PTT return has been processed, you must meet further requirements during your first year of ownership to retain the tax exemption.
For an existing home, the criteria are:
- You must have moved in within 92 days of registering the property
- You used the property continuously as your primary residence for the duration of your first year
For a newly built home you constructed on a vacant plot of land you purchased and registered, the criteria are:
- The combined fair market value of the land and home must be less than $525,000
- You must have built and moved into the home within one year of registering it
- You continuously occupied the property as your primary residence for the whole year
Suppose you didn’t apply for the tax exemption on your PTT form when you registered your home.
In that case, you can still apply for a refund, provided you meet all the eligibility requirements.
You have up to 18 months from the first anniversary of your registration to claim your PTT refund and can do so by submitting the First Time Home Buyers’ Application for Refund form with any necessary documentation.
Restrictions To Be Aware Of
A crucial aspect of the First Time Home Buyers’ program to understand is that it primarily benefits those who purchase a home with a fair market value of up to $500,000.
If your property’s value doesn’t exceed this threshold, you’re entitled to the maximum exemption, which will bring down your PTT liability to $0.
What if your home’s value exceeds $500,000? In that case, the exemption is applied on a sliding scale, and it disappears entirely for every dollar of value above $525,000 (similar rules apply if your property occupies more than 0.5 hectares).
As a result, homebuyers who purchase lavish homes won’t derive any benefits from the program.
For example, suppose your home is worth $515,000.
In that case, you’ll receive a partial exemption of $3,320, which means your total PTT liability will be $4,980.
You can view a table of the reduced rates at various price levels here.
Under certain circumstances, only a portion of your home will be eligible for the First Time Home Buyers’ program.
Let’s say you purchase a property jointly with another individual who doesn’t qualify as a first-time homebuyer.
In this scenario, if both of you have a 50% interest in the home, only 50% of it would be eligible for the exemption.
As a result, the maximum tax savings the program would yield is $4,000 ($8,000 x 50%).
The sliding scale would apply accordingly on the eligible portion of the property.
Continuing with our example above, a home worth $515,000 would be eligible for a partial exemption of $1,660, resulting in tax payable of $6,640.
You can view a table of the reduced rates where only 50% of the home is eligible for the tax exemption here.
