Can you be a first-time home buyer if you have purchased real estate before? It sounds like a simple question that should have a straightforward answer. Leave it to the real estate industry to make it more complicated, but as with many things, it’s nuanced. 

You may have bought a house before but your spouse has not. Or you may have purchased an investment property and never lived in it. What counts and what doesn’t, and perhaps most importantly, why does it matter? 

Since there are some desirable tax credits and incentives available only to first-time home buyers, it’s a topic worth diving into. Today, we’ll talk about who is considered a first-time home buyer.

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A First-Time Buyer According to the Federal Government

Your average, normal citizen would likely consider a first-time home buyer to be someone who has never bought a house before, ever, at any point, anywhere in the world. That is the simplest and most logical definition, but since when has the government ever been simple or logical? 

According to the Canadian federal government, the first-time home buyer definition means not having lived in a home you (or a spouse or common-law partner) owned or jointly owned in the last four calendar years. 

In other words, you could have bought a house when you were twenty, sold it at age 25, rented ever since then, and be considered a first-time home buyer at age 30. Alternatively, you could have inherited, purchased, or been gifted a rental property that you never lived in. According to federal first-time home buyer rules, you qualify. 

If you become separated from your marriage or common law partner, you can also requalify as a first-time home buyer if you have not lived in a house you or they owned for four years or more. 

Planning to make your first purchase in Toronto? The posts below might solidify your decision:

The Ontario First-Time Home Buyer Definition

The province of Ontario uses a more straightforward definition of a first-time buyer. You qualify if you have never owned a property, or a share of a property, anywhere in the world at any time. There is no “do-over” with the province as there is with the federal government. 

A house you bought and sold years ago disqualifies you, as does any rental or vacation property. If you have bought a home but sold it before you got married, they can be considered a first-time home buyer. If you still own the home when you get married, your partner no longer qualifies for any provincial incentive. 

Dreaming of finding the right home in Midtown Toronto? Start by checking out our featured listings. 

Why Qualifying as a First-Time Home Buyer Can Matter

It’s no secret that a home is one of the most expensive purchases you will ever make, especially in Toronto, where real estate prices are notoriously high. Both the federal and provincial governments have valuable incentives just for a first-time buyer. 

The First Home Savings Account

It takes time and careful planning to get the maximum benefit from the First Home Savings Account (FHSA). However, this is the most tax-advantaged account you can open in Canada. You can contribute up to $8,000 tax-free every year to a lifetime maximum of $40,000 into a savings program just for the purpose of buying a house. Each deposit also lowers your income for the year, which decreases the amount of tax owing. 

Any interest or dividends your funds earn is also tax free. You also don’t pay tax on the way out as long as you make a qualifying withdrawal. After purchasing your home, you simply close the account, and there is nothing to repay. This ability to reduce taxes both in and out makes the FHSA one of the most valuable first-time home buyer benefits. 

Home Buyer’s Plan

If you already have a registered investment account, you can withdraw up to $60,000 tax free as long as it goes toward a qualifying purchase. Depending on the purchase price, this alone may be enough to cover your entire down payment. 

However, there is one catch with the Home Buyer’s Plan. You must repay any funds back into your RRSP to avoid a tax penalty. 

First Time Home Buyer Tax Credit

The last federal first-time home buyer program is a simple tax credit. You can claim $10,000 on your tax return, which will result in a savings of $1,500 off your tax owing for the year. 

If you are buying with a partner who is also a first-time home buyer, you can split the credit between you. However, the total credit between both owners cannot exceed $10,000. 

Looking for even more tips to make your first home purchase a success? The posts below can help:

Ontario Land Transfer Tax

Closing costs can be significant, especially since they’re closely linked with the total purchase price. The land transfer tax is typically the highest closing cost associated with buying a house, which is reason enough to want to qualify as a first-time home buyer. 

If you have never purchased property anywhere at any time, you can take advantage of an instant $4,000 rebate, which is a substantial saving considering these taxes must be paid up front. 

Toronto Land Transfer Tax

The municipality of Toronto requires its own land transfer tax. Fortunately, there is another rebate for those who are making their first purchase. 

Toronto’s definition of a first-time buyer matches the province; you must not have owned property anywhere, ever. It’s great news if you qualify, since you can save $4,475 on your total bill. 

Getting onto the property ladder in Toronto comes with its share of challenges. These provincial and federal incentives make it easy to see the benefit in qualifying as a first-time buyer. A local real estate agent can advise you on what resources are available to help you into the market, perhaps sooner than you thought possible. 

Whenever you’re ready to start your search, our Midtown Toronto real estate agents are here for you. Reach out to us at david@batorigroup.com, bobby@batorigroup.com or call (416) 485-7575 with any questions.