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First-time homebuyers might want to have discussions with a tax specialist if you end up renting your whole apartment.Sean Kilpatrick/The Canadian Press

It doesn’t matter what Canadian real estate market you’re in: The increased costs of paying a mortgage are scary when you buy your first home.

For me, my monthly housing costs doubled when I went from renting a one-bedroom apartment to owning one, and that’s before factoring any sort of maintenance or renovations. At first, I figured that I could always move in with friends again and rent out my apartment if the costs became too much. It would be even more savvy if I used those savings to make extra payments on my mortgage, right?

Well, I’m here to tell you that I quickly learned that it’s not that simple, especially if you’re a first-time homebuyer.

That’s because there are thousands of dollars of tax benefits you get if you’re purchasing a home for the first time. That includes an exemption for land transfer taxes in some provinces, which are an upfront cost that can’t be factored into your mortgage. In B.C., where I live, local governments will give you a rebate on your property tax if your home is also your primary residence.

“People are not always aware of the complications that come with using your house as a rental,” said Yannick Lemay, a tax specialist with H&R Block.

In B.C., the land transfer tax exemption for a $500,000 home would amount to a savings of $8,000, a sum that immediately comes off your closing costs.

But to actually qualify for the program, you have to live in your home continuously for the full year after your purchase. If you move out, you may have to repay a portion of the rebate, although Mr. Lemay says the province isn’t clear on what happens in this scenario. A similar program in Ontario is more lenient – requiring only that you move into your property within 92 days after your purchase to be eligible.

Then there’s the B.C. homeowner grant, which is a property tax rebate for homeowners. In my area, it amounts to $770, but anyone renting out their home isn’t eligible for it.

And lastly, the federal First-Time Home Buyer’s Tax Credit is a $10,000 credit deducted off your income when you file for taxes. That can represent up to $1,500 in actual savings on your tax return. The qualification rules are a bit more lenient here (you only have to occupy the home one year after purchase), but it still could limit your plans.

Tally that up, and you’re looking at $10,000 in tax benefits that could be at risk if you end up renting the home you planned to live in.

However, there is good news for people who purchase larger homes with more bedrooms: None of these incentives are at risk if you rent out a room in your home while still living in it. That’s because these credits generally hinge on the home being your primary residence, so if that’s the case, you’re all good.

In my housing search, I saw many one-bedroom and two-bedroom condos listed for fairly similar prices. The one-bedroom units were fancier, while the two-bedroom units might have been less updated and in lesser buildings.

I ended up going the one-bedroom route, and I don’t regret it at all. But for some people, the flexibility that a two-bedroom apartment offers could be worth it, especially considering that you have an option to rent out your apartment that doesn’t jeopardize your access to thousands of dollars in tax savings.

Be warned, though: You might have some lengthy discussions with a tax specialist if you end up renting your whole apartment.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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