RRSP Home Buyer’s Plan

The Home Buyer’s Plan (HBP) allows you to borrow funds from your RRSP to buy or build a qualifying home, if:

• You or your spouse or common-law partner have not owned a home which you occupied as your principal residence during the four years preceding the withdrawal for the Home Buyer’s Plan, or
• You are buying or building a home for a related disabled person.

The maximum amount that can be borrowed was increased to $25,000 by the Federal 2009 Budget, which also announced a new First-Time Home Buyers’ Tax Credit.

Note that your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the Home Buyer’s Plan, or the contributions may not be deductible for any year.  In other words, if RRSP contributions are made in the 89-day period just prior to an HBP withdrawal from the RRSP, the value of the RRSP after the HPB withdrawal must be at least equal to those contributions.

Income tax will not be deducted from the amount withdrawn, and the withdrawal amount will not be included in your income.  The funds must be repaid over a maximum of 15 years, starting the second year following the year in which they are withdrawn.  Each year that a repayment is due but not paid, the amount due (1/15th of the amount borrowed) will be included in taxable income.  See the article Make sure you report repayments to RRSP Home Buyer’s Plan! on the Filing Your Return page.

If you buy the home with your spouse, common-law partner, or other individuals, each of you can withdraw up to $25,000.

A qualifying home means:

• A housing unit located in Canada, or
• A share of the capital stock of a cooperative housing corporation, the holder of which is entitled to possession of a housing unit located in Canada

You must buy or build the qualifying home by October 1 of the year after the year of withdrawal.  There are other conditions which must be met in order to qualify for the Home Buyer’s Plan, including your intent to occupy the home as your principal residence no later than one year after building or purchasing it.  Some conditions must be met before applying to withdraw funds and other conditions must be met when a withdrawal is made.  One of the conditions that must be met before applying to withdraw funds is that you have to enter into a written agreement to buy or build a qualifying home.  For more information, see the Canada Revenue Agency (CRA) information on the Home Buyer’s Plan, including conditions for participating in the HBP.

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