RRSP Home Buyers Plan
October 22nd, 2015 by Robert Smith
When two or more eligible individuals jointly purchase a home, the credit may be shared but the total credit amount claimed cannot exceed $5,000.
In addition to the HBTC, first time home buyers are also eligible for the Home Buyer’s Plan (“HBP”). This is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSP) to buy or build a qualifying home for yourself or for a related person with a disability. If the client is buying the home jointly with other people, all of the purchasers are eligible for the $25,000 withdrawal as long as they meet the criteria below
In order to qualify for the HBP the client must meet three criteria. The client must be considered a first-time home buyer. They must have a written agreement to buy or build a qualifying home for themselves, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home (obtaining a pre-approved mortgage does not satisfy this condition). Finally, the client must intend to live in the qualifying home as their principal place of residence within one year after buying or building it. If the client buys or builds a qualifying home for a related person with a disability, or helps a related person with a disability buy or build a qualifying home, they must intend that that person lives in the qualifying home as his or her principal place of residence within one year after buying or building it.
The RRSP withdrawal conditions are as follows:
- The client has to be a resident of Canada at the time of the withdrawal.
- The client has to receive or be considered to have received, all withdrawals in the same calendar year.
- The client cannot withdraw more than $25,000.
- Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. The client can withdraw funds from more than one RRSP as long as they are the owner of each RRSP. The clients RRSP issuer will not withhold tax on withdrawal amounts of $25,000 or less.
- Normally, the client will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.
- The clients RRSP contributions must stay in the RRSP for at least 90 days before they can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.
- Neither the client nor their spouse or common-law partner or the related person with a disability that you buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.
- The client has to buy or build a qualifying home for themselves, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1 of the year after the year of the withdrawal.
- The client has to complete Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.
The client will have 15 years to repay the money to their RRSPs without incurring taxes, beginning two years after the withdrawal. Each year, the CRA will send the client a Home Buyers’ Plan (HBP) Statement of Account, with their Notice of Assessment or Notice of Reassessment. The annual amount due will be the sum of the balance remaining ($25,000 or less) divided by the amount of years remaining (starting at 15 years). While the amount can be repaid in 15 years, the client can repay more than the required amount or the full amount into their RRSP at any time. If the annual amount is not repaid, that amount is considered taxable income for that year.
http://www.actionplan.gc.ca/en/initiative/first-time-home-buyers-tax-credit
http://www.budget.gc.ca/2009/plan/bpa5a-eng.html#3
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/menu-eng.html
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