Francesca Giroux, CPA
For the Lakeside Leader
The Home Buyers’ Plan (HBP) is a program implemented by the Canada Revenue Agency (CRA) that allows individuals to withdraw contributed funds from their registered retirement savings plan (RRSPs) to buy or build a home for themselves, or for a related individual with a disability. This plan allows for individual to withdraw up to $25,000 in a calendar year to assist in a purchase or the construction of a qualifying home. One of the conditions of the HBP is that the RRSP contributions must remain in the RRSP for at least 90 days before they can be withdrawn or they may not be deductible on your tax return for any year.
In general, the amount withdrawn from your RRSP under the HBP must be repaid within a period of 15 years. An amount must be repaid under the HBP each year until the balance remaining is zero (i.e. you cannot skip a year and then double up the payment in the following year). If an amount is not repaid through RRSP contributions the required payment will be included as income on your tax return for that year.
There are a few additional conditions to be kept in mind before withdrawing funds from your RRSP under the HBP. First of all only the individual who is eligible to receive payments from the RRSP (i.e. the annuitant) can withdraw the funds (individuals can withdraw funds from more than one RRSP as long as they are the plan owner of each RRSP – tax will not be withheld by the RRSP issuer on the amounts withdrawn). Secondly, prior to withdrawing funds under the HBP you must have entered into a written agreement to buy/build a qualifying home for yourself, a related person with a disability, or to help a related person with a disability buy or build a home. Please note that obtaining a mortgage pre-approval is not considered to be sufficient as a written agreement. Moreover, you (or the related individual with a disability) have to live in the home as your principal place of residence no later than one year after purchasing or building the home. In addition, you have to be considered to be a first time home buyer.
For CRA purposes you are not considered to be a first time home buyer if, at any time during the period starting January 1st of the fourth year before the year of the withdrawal and ending 31 days before the date of withdrawal, you or your spouse (common-law partner) owned a home that you occupied as your principal place of residence.
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Information provided is of a general nature. As each individual or company’s situation is unique, you may wish to consult with your CPA for information specific to your own needs.