The Home Buyers Plan allows you to borrow up to $25,000 from your RRSP’s tax free to buy or build a home. Each plan holder (home owners) may withdraw up to the $25,000 limit their RRSP accounts except for locked-in accounts. This means that the combination of withdrawals from you and your spouses’ RRSP’s cannot exceed $50,000.
Buying a Home & Your Taxes
Who Qualifies For The HBP?
You can use the HBP if:
- You or your spouse have not owned and occupied a home as your principal residence in the preceding 4 years, or
- You are buying or building a home for a disabled person who is related to you.
Do The Funds Have To Be Used To Build or Buy A Home?
No. You can use the funds for any purpose you like. You only have meet the qualifications.
Home buying advice for first timers
Is There Any Tax On the HBP Withdrawal?
The withdrawal under the HBP is tax-free but there are things you have to do to ensure the withdrawals remain tax free.
- The funds withdrawn must be used to acquire a home before October 1st of the year following the withdrawal.
- The funds must be repaid to your RRSP over a maximum of 15 years. These repayments begin in the second year following the HBP withdrawal. The minimum repayment is 1/15th of the actual HBP withdrawal. If you do not make a repayment, 1/15th of the withdrawal will be added to your income in the year is was due.
- To ensure you have disclosed your repayment appropriately, be sure to complete Schedule 7 of your Federal Income Tax Return.
First Time Home Buyers Tax Credit
If you bought a home after January 27, 2009, you may be entitled to claim the $2,000 first time home buyers tax credit. This is a non-refundable tax credit that can be claimed either by the purchaser of the home or their spouse.