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- The funds withdrawn must be used to acquire a home before October 1st of the year following the withdrawal.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.
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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.
Hey Tax Guy,
My wife and I just purchased a home that closes in July 2011. We both meet the conditions of first time homebuyer.
I have $52000 in unused RRSP contribution room. I recently took out an RRSP loan of $25000. I intend to withdraw the money to pay off the loan after 90 days so that I can collect the tax return next spring.
I would like to repeat this process by taking a second loan of $25000 to contribute to a spousal RRSP. I understand normally contributions of this kind cannot be withdrawn within 3 years. Will my wife be able to withdraw these funds under the Homebuyers plan, and if so, will I be able to collect the tax break from the contribution?
Sean,
You are going to borrow to put money into your RRSP and take a deduction for 2009. Then withdraw the money (under the HBP??) after 90 days. You plan to borrow a second amount and contribute to your spouse’s RRSP and have her withdraw under the HBP.
The person making the withdrawal from the RRSP must be the annuitant. You can withdraw $25,000 under the HBP from a plan to which you are the annuitant and your spouse may withdrawal up to $25,000 from a plan they were the annuitant. It would seem reasonable that you each could withdraw $25,000 under the HBP (provided you meet all of the other qualifications) and make the, repayments.
Just to clarify, the three year rule for withdrawals from a spousal RRSP doesn’t apply when the withdrawal is made under the HBP? Only the 90 day rule stated in the HBP applies?
Thanks
Correct.
In 2006, I withdraw 6500 from my RRSP use as HBP for my first time home buyer. Then shortly, I became non resident because I had to move to the US with my job. I accidentally forgot to file 2006 taxes with the amount of 6500.00, but simply filed in the US taxes only without the 6500.00. I am now a non resident of Canada. Understand that I will have to file 6500 as a taxable income for a non resident. In your expert advice, do you know how much taxes will I be subject to pay on 6500 HBP? Is there penalty? I cannot get upset with the past, but simply try to resolve the situation correctly. Many thanks for all your help.
Isla,
If you had no other income or investments, or if you did and the total of thos plus the HBP withdrawal was under $9,600, then the tax is close to nil.
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