If you know of ways to save money in other provinces, please share the links in the comments, and I will be happy to add them. So, where and how can you save money when buying real estate in Canada, and in British Columbia in particular?

Home Buyers’ Plan: RRSP (federal)

The bottom line is that the Canadian government is trying to encourage people to save for their own retirement and is doing so through a special deposit account that can be opened at any bank — the RRSP (Registered Retirement Savings Plan).

You can use up to $25,000 from your retirement fund (+ the same amount from your spouse’s account) — RRSP — for the down payment. Over the next 15 years, you must return the entire amount back to your account, starting from the year after the purchase.

• Based on your previous tax return, the tax service indicates how much you can contribute to your pension fund;
• The funds you put into it during the year are deducted from your income in the next tax return;
• Accordingly, if your official income has been reduced by a certain amount and you have already paid taxes (which are often deducted automatically from your salary) on your full income, you are entitled to a refund of the difference, meaning you will receive approximately 1/3 of the amount you contributed back.
• You can withdraw the funds deposited into this account at any time, but in this case, the amount withdrawn will be added back to your income for that year and you will have to pay income tax on it.
• The system is designed so that when you retire, your income usually decreases significantly, as does the tax rate, so by gradually withdrawing these funds, you will pay significantly less tax (this is possible thanks to the progressive tax rate system in Canada).
• In order to help Canadians buy their first home, the government allows them to withdraw up to $25,000 from this account tax-free, provided that the entire amount is gradually repaid over the next 15 years.

Thus, you put money into this kind of piggy bank every month for several years, where it also accrues interest from investments, and when you reach $25,000, you withdraw the entire amount for the down payment.

It is not entirely correct to talk about net profit here; rather, the fact that part of the money is “temporarily” returned to you at the end of the year helps you save the required amount faster.

The idea is that by contributing, say, $20,000 to your retirement account over a couple of years in Canada, you will get $6,000 back in your hands and can also get a couple of thousand in growth, after which you can use this $22,000 or whatever you end up with for a down payment.

It can be arranged at the bank at any time after filing your first tax return (opening an RRSP account) and then when purchasing a home — before making a deposit after an accepted offer — as a Home Buyer’s Plan.

After withdrawing funds to purchase your first home, you do not pay tax on the amount withdrawn from your retirement account, but you are required to return the entire amount to the account within the next 15 years, starting from the year after the purchase.

Thus, in the year of purchase, you only withdraw money and owe nothing, then you must contribute a certain amount back to the RRSP each year (1/15 of the amount withdrawn). On your tax return, you indicate these funds as returned and do not receive a refund on them. There, if you wish, you can indicate that you are returning more than the required amount (from your RRSP contributions). If you do not return or do not return the full amount required for the year, then when calculating your tax refund, the shortfall is counted as income and taxed.

First-Time Home Buyers’ Tax Credit (federal)

For those who are buying their first home (provided that you will actually live in it) in any province, there is a tax refund equal to the minimum tax rate multiplied by $5,000 — that is, a maximum of $750.

This is indicated when completing the annual tax return for the year in which the purchase was made.

Income Tax Deduction

If you work on a contract basis or have additional income (for example, from side projects or selling photographs) and work at least part of the time from home, you can deduct part of your home office equipment, electricity, heating, and other expenses. This is no secret. What’s more interesting is that you can also get back part of the interest you pay on your mortgage from your income taxes, and if your additional income is low, you can get back even more than you paid in taxes (up to $750 more than you paid, I think).