Are you a first-time home buyer? The Home Buyers Plan (HBP) can help free up funds to finance your down payment, tax-free. The HBP is a program of the Canadian federal government administered by the Canada Revenue Agency (CRA). Through the Home Buyers Plan, eligible buyers can withdraw up to $25,000 from your Registered Retirement Savings Plan (RRSPs) to go toward the purchase of your first home. Buying a home with your spouse, a family member, or other individual? You are each eligible to withdraw up to $25,000, provided you both qualify as first-time home buyers. The HBP can also be used to purchase a home for a relative with a disability, although the applicable terms and conditions differ.
Starting two years after your withdrawal, you have a window of 15 years to repay your RRSPs the full amount without incurring any taxes. The CRA will provide you with a yearly repayment plan. If you fail to repay the required amount in a given year, it will be counted as taxable income for the year. You can pay back your RRSP on the provided schedule, or pay it back faster if you wish. HBP repayments do not affect your yearly RRSP contribution limit.
The eligibility criteria for RRSP withdrawals under the Home Buyers Plan are as follows:
Other restrictions and eligibility criteria apply. Visit the CRA website or speak with your mortgage planner for more details.
Not all RRSPs are eligible for the HBP. Generally, locked-in RRSPs and group plans do not allow withdrawals. To be certain, verify with the issuer(s) of your RRSP to learn which RRSPs can be used for the Home Buyers Plan.
The Home Buyers Plan applies to most homes in Canada. You can purchase a resale freehold property, townhome, or condo, or a new build home. The rules differ slightly for cooperative housing, so please inquire for more details.
You will start repaying the second year after your withdrawals. Each you, you are required to pay 1/15 of the total amount of the withdrawal. You must meet the minimum, but you can repay more each year if you would like. In that case, the payments will be recalculated based on the balance owning divided by the number of years remaining in your plan. If you fail to repay the required amount in a given year, you must declare the unpaid amount as RRSP income. You will be required to pay applicable taxes.
Even if you have no taxes to pay and no income to report, you must file an income tax return each year and complete Schedule 7.
Every year, your income tax Notice of Assessment or Notice of Reassessment will indicate the total amount you have repaid to your RRSPs; the balance remaining on your HBP withdrawals; and the amount you are required to repay the next year. The same information is found on the My Account tax service.
Any more questions? Call us at (905) 265-0246 or email at firstname.lastname@example.org. One of our representatives will be pleased to discuss the Home Buyers Plan with you.
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