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 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.
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.
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- The funds withdrawn must be used to acquire a home before October 1st of the year following the withdrawal.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.
Questions?
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What a great reminder. With all that fuss over the home renovation tax credit and the first time home buyer tax credit, sometimes we forget about the HBP and the increase to 25K
It had been a while since I had last updated this page. It was overdue!
Is there a minimum time that the funds must be in your RRSP before you can withdraw them for the HBP?
Thanks.
@Paul: RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.
Hi,
I have the following scenario:
I contributed to my RRSP and a spousal RRSP account for several years with the idea of withdrawing money to buy a house under the HBP. My wife didn’t work at the time so she didn’t have any RSP room.
I withdraw the money: $20K from my RSP and $10K from the spousal RSP and my wife and I bought the house.
Now is time to re-pay. The HBP statement for my wife shows a balance and so does mine since that is the way we filed the tax return in the withdrawal year.
Now, If I make contributions to both personal and spousal accounts from which the money was withdrawn, they will appear in my personal return not my wife’s. This is forcing to add the annual re-payment to my wife’s income.
One additional consideration is that now my wife is working so she has some RSP room.
My questions are: Was I wrong to withdraw from the spousal RSP account under the HBP?
Since my wife has her RSP acount now should she contribute to her own RSP account and designate part of the contribution as a repayment of HBP?
Is there a way to avoid the increase in my wife’s income (by the annual repayment amount) by me contributing to the spousal RSP account?
Thanks for your help.
Edwin.
Hi Edwin:
You can withdraw under the HBP from an RRSP to which you are the annuitant. This means you withdraw from your own RRSP and your spouse can withdraw from the spousal plan or her own RRSP.
You will only be able to claim repayment under the HBP for contributions made t your own RRSP. Spousal contributions do not count.
Your wife will have to contribute to her RRSP under the HBP. While it is possible for you to “gift” her the funds and have her contribute them, attribution would probably apply to these contributions over and above the regular spousal contributions. Although it is unlikely the CRA could enforce this.
My wife and I have been in HBP since 1997. The limits then we $20,000 per and between us we only used about $26000 for first home purchase (could have used more but didn’t). Currently we have about $5000 left to pay off in total. Question the limits have increased from 20 to 25,000 per. Is there a way we can request having this new limit added to our original HBP plan as we would have done so if available then.
Hello Gerry:
The HBP limits apply to new home purchases. They cannot be used to reduce existing repayments.
I have been searching for an answer to my HBP question for years and hope that someone here might be able to answer it.
Exactly 15 years ago I enrolled in the HBP and used about $3000 from an RRSP I had at a Major Bank. A few months before I deceided to buy the house I contributed $3000 to my first RRSP, just to say that I contributed 3000 real dollars.
Every year since, my tax assessment has deducted $250 (or so) from my refund to pay back the HBP. I have about $250 left to pay of the $3000.
My question is what happens to my RRSP? In the 15 years since I have started paying it back I have not seen anything from the Bank where I held the RRSP. After 5 years I would have paid back $1250 and would have expected to have a statement from them showing how the particular funds were doing. Nothing.
Some people say that once it payed back to the Government, thats pretty well it.
From my perspective, I took $3000 of after-tax dollars, contributed to an RRSP and got back (say) $1250. I then withdrew $3000 from the RRSP to buy a house and every year I have been paying it back. Now, I should again have an RRSP with $3000 in it at the Bank, but no one seems to know. Otherwise, I have just given $6000 to either the Bank or the Government for absolutly nothing.
Any explanation would be appreciated.
Hello Robert,
The HBP allows you to withdraw from your RRSP tax free. You must repay the amount over a 15 year period. The repayment is made by making a contribution to your RRSP and then designating a portion of the repayment as a HBP repayment. The designation is done on your annual tax return and is the not considered a deduction.
If you don’t make the designation, then 1/15th is added back to your income on your return.
Hello,
Can we use the HBP to buy foreign property?
No. The property must be in Canada.
I inverted in rsp 15000. As a first time buyer I withdraw 5000 from my rsp to pay off my initial down payment. For this transaction TDCANADA charged me 50$ as a withdrawal fee.
I submitted my first time home buyers form (HBP). Still TD says you have to pay 50$ as a withdrawal fee.
Is it right what TD is doing?
Because I have another 10000 of my rsp account and 15000 on my wife rsp account. They say you have to pay 50$ per each withdrawal per person per transaction.
It means I have to pay 150$ as total withdrawal fee. Which is really waste of money??????
Is this withdrawal fee is true, if so, can we avoid this fee.
Thank you
The fee is a bank charge and has nothing to do with the taxes. You should speak to your bank.