The Ontario Home Ownership Savings Plan (OHOSP) has already helped more than 250,000 first-time buyers realize their dreams of home ownership. This article explains how an OHOSP can help you save for your first home. It describes the eligibility requirements for opening a plan, OHOSP tax credits and other details about the program.
How the Plan Works
If you earn less than $ 40,000 (or if you and your spouse have a combined income of less than $ 80,000), you can benefit from the Ontario Home Ownership Savings Plan.
Other eligibility requirements include:
- You must be 18 years of age or older;
- You must be an Ontario resident;
- You must have a social insurance number;
- Neither yourself nor your spouse have ever owned an eligible home anywhere, whether or not it was owner-occupied; and
- You never previously held an OHOSP.
There is no limit to the amount of funds you may deposit in your OHOSP. However, you will only receive OHOSP tax credits on annual contributions of not more than $ 2,000 individually (or $ 4,000 per couple).
Depending on your annual income and the amount you invest in your OHOSP, you can earn up to $ 500 individually or $ 1,000 per couple in OHOSP tax credits. You are eligable for tax credits for five consecutive years. You must close the plan and use the funds to purchase a home by the end of the seventh year. Otherwise, you must repay your OHOSP tax credits with interest.
Keep in mind that to qualify for a tax credit for the current taxation year, you must open a plan by December 31. A plan can be opened at any participating financial institution across the province. The funds you deposit into your OHOSP will earn interest at competitive rates.
You can only open one OHOSP, but your plan can be transferred from one financial institution to another. Joint OHOSPs are not available, so each spouse must open separate OHOSP accounts.
Qualifying homes include:
- A detached or semi-detached house;
- A townhouse; A mobile home with a permanent foundation;
- A condominium unit;
- Shares in a co-operative corporation housing unit; or
- A duplex, triplex or fourplex.
Your home must be located in Ontario and be suitable for year-round residential occupancy. In addition, you must live in the home for at least 30 consecutive days within two years of the date of purchase.
Buying a Home
After you sign an Agreement of Purchase and Sale, but approximately four weeks before closing, complete an “OHOSP Home Purchase Declaration” form. This form is provided by the financial institution where you have your OHOSP. Your OHOSP funds will be released to your solicitor who will apply them to your home purchase. If you are not using a solicitor, contact the Ministry of Finance regarding the release of your funds.
Closing an OHOSP Without Buying a Home
If you close your plan without purchasing a home, you are not eligible for an OHOSP tax credit for that year. You will receive 75% of the funds in your plan from your financial institution. The balance of 25% is forwarded to the Ministry of Finance for a tax recovery credit. Any balance owing (with interest) will be returned to you.
OHOSP Tax Credits
OHOSP tax credits are based on your annual net income (line 236 of your income tax form) and your contributions to your plan each year. For couples, only one spouse can claim the OHOSP tax credit.
Here is a breakdown of approximate OHOSP tax credits:
Income Contribution Tax Credit
Up to $ 20,000 $ 2,000 $ 500
$ 25,000 $ 2,000 $ 375
$ 30,000 $ 2,000 $ 250
$ 35,000 $ 2,000 $ 125
$ 40,000 and over $ 2,000 $ 0
Income Contribution Tax Credit
Up to $ 40,000 $ 4,000 $ 1000
$ 50,000 $ 4,000 $ 750
$ 60,000 $ 4,000 $ 500
$ 70,000 $ 4,000 $ 250
$ 80,000 and over $ 4,000 $ 0
Land Transfer Tax Refund
The Land Transfer Tax (LTT) refund which was a component of the original plan has not been continued. As a result, LTT refunds will only be issued to those who opened a plan before January 1, 1994.