The Home Buyers' Plan (HBP) is a program under which you can, generally, withdraw up to $25,000 from your Retirement Savings Plan (RRSPs) to buy or build a qualifying home. Withdrawals that meet all applicable HBP conditions do not have to be included in your income, and your RRSP issuer will not withhold tax on these amounts. However, before you can withdraw funds you must have entered into a written agreement to buy or build a qualifying home which you must occupy no later than one year after buying or building the home.
If you buy the qualifying home together with your spouse or other individuals, each of you can withdraw up to $25,000. You cannot withdraw an amount from your RRSP under the HBP if you or your spouse owned the home more than 30 days before the date of your withdrawal.
Details:
* Up to $25,000 per person could be withdrawn tax-free from RRSPs to buy or build a principal residence. Couples -- including common-law -- will be able to withdraw up to $50,000.
* You have to meet the first-time buyer's condition. You are not considered a first-time home buyer if you or your spouse owned a home that you occupied as your principal place of residence in the past 5 years. To determine past 5 years, the 4 years preceding the year you make your withdrawal plus the period in the year you make your withdrawal ending 31 days before your withdrawal is the rule adopted.
* Home buyers withdrawing funds do not have to pay income tax on the amount withdrawn, as long as the funds are repaid into an RRSP in the future.
* The 15-year repayment period will begin in the second calendar year following the calendar year in which the withdrawal is made. In addition, a qualifying home must generally be acquired before October 1 of the calendar year following the year of withdrawal. For example, those making withdrawals under the plan in 2009 will have until October 1, 2010 to acquire a qualifying home and their first annual repayment will be due by the end of 2011 or the first two months of 2012.
* A special rule denies a tax deduction for contributions to an RRSP that are withdrawn within 90 days of the RRSP deposit being made. Consequently, to get the normal tax break for a contribution and to use those funds under the plan, the money must be in your RRSP for at least 90 days before a withdrawal is made.
* Existing homeowners can use the HBP to purchase a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:
1) Qualifies for the disability tax credit (DTC) and is buying a home that is more accessible for the individual or is better suited for the care of the individual;
2) Is related to a disabled individual who qualifies for the DTC and is buying a home for the benefit of the disabled individual that is more accessible for, or better suited for, the care of the disabled individual, or;
3) Is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.
RRSP HOME BUYER'S PLAN
Qualified buyers (as described below) may borrow INTEREST FREE FOR 15 YEARS from RRSP savings up to $25,000 per buyer (up to $50,000 per buying couple) towards the cash down payment on the purchase of a residence. Banks discourage buyers from doing so BECAUSE banks want buyers to borrow by paying bank interest and not by borrowing interest free for 15 years from RRSP which does not profit the bank. The VERY best investment for one's RRSP is in the purchase of a principal residence which, in time, generates a TAX FREE capital gain.
R.R.S.P. HOME BUYER PLAN ("RRSP PROGRAM")
(Important information about the RRSP Program)
WHO ARE FIRST TIME BUYERS?
You must be a first time home buyer or you (or your spouse or common law spouse) must not have owned a home that you occupied in the last five (5) years. Provided you satisfy all requirements, you may re-activate the program. Before withdrawing RRSP funds, you must have a written agreement to purchase a home.
PRINCIPAL RESIDENCE:
You must use the home as your principal residence in Canada within one year of completing the purchase.
RESIDENT OF CANADA:
You must be a resident of CANADA for the period between the date of withdrawl of RRSP funds and the closing date of the house purchase.
ANY HOME (NEW OR RESALE):
The home can be new from the builder or resale.
NO MONEY OWED FOR PRIOR RRSP BORROWINGS:
At the time of the RRSP withdrawal, you must NOT owe any money to your RRSP for a prior borrowing from RRSP to buy a home.
90 DAY DEPOSIT;
R.R.S.P. funds must have been on deposit for at least 90 days before they can be used under the program.
WITHDRAW RRSP WITHIN 30 DAYS OF COMPLETING HOME PURCHASE:
RRSP funds cannot be withdrawn later than 30 days after the house purchase is completed and if multiple withdrawals, they must be made in the same calendar year or in January of the next year.
FUNDS FOR ANY USE:
The funds can be applied to the downpayment, land transfer tax, legal fees and disbursements, improvements to the home, even furniture and appliances.
MAXIMUM $25,000.00 PER BUYER:
You can borrow up to a maximum of $25,000.00 from your R.R.S.P. tax free. Maximum for two spouses (or any 2 buyers) is $50,000.00. Any such qualified withdrawal from RRSP is not subject to tax at time of withdrawal.
PAY BACK:
After an initial grace period of the year in which the withdrawal was made (plus one more full calendar year), you are required to pay back the funds borrowed (beginning in the second year following the year of withdrawal) over a period of 15 years by depositing 1/15th of the amount withdrawn, annually to your R.R.S.P. Prepayments are allowed at any time without penalty. However, if you miss a payment for any given year, you will not be allowed to pay it back and it will be included in your taxable income for that year. If a person paying back dies or becomes a non-resident or becomes 70 years of age, additional repayment rules apply.
For more information:
Contact the nearest branch of your Bank or phone Revenue Canada at 1-800-959-8281.
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