RRSP Home Buyer's Plan
The Home Buyer’s Plan (HBP) is a government program that allows home buyers to withdraw up to $25,000 from their Registered Retirement Saving’s Plan (RRSP) to put towards buying or building a new home. Before you can withdraw funds, you have to be entered into a written agreement that specifies whether you will be buying or building your new home. You also must occupy this space no later than a year after buying or building this new home.
To take advantage of this program you have to be considered a first-time buyer. You are not* a first-time home buyer if you (or you and your spouse) has owned a home which you have occupied as your principal place of residence in the past 5 years. Once those conditions are met each person can withdraw up to $25,000 tax-free from their RRSP for a new home. Couples, including common-law, can withdraw up to $50,000. You will not pay income tax on these amounts as long as these funds will be repaid into an RRSP in the future. Existing homeowners can also use this program to purchase an accessible home or a home for a disabled dependent relative. The intended individual must qualify for the Disability Tax Credit (DTC) and this home must be more accessible or better suited to the care of this individual.
If you receive a withdrawal in one year and another in January of the following year, we consider the January withdrawal to have been received in the year the first withdrawal was made. If the January withdrawal is received before you acquire your qualifying home, or no later than 30 days after you acquire it, and all the other relevant conditions described in the chart below are met, it is an eligible withdrawal. For this purpose, your HBP balance on January 1st is not a relevant condition and does not have to be zero.
If you meet the applicable HBP conditions, you cannot withdraw more than $25,000. Your RRSP issuer will not withhold tax from the funds you withdraw that total $25,000 or less. An amount exceeding $25,000 will have to be reported as income on your income tax and benefit return for the year you received it. In addition, your RRSP issuer will have to withhold tax on the amount in excess at the time of the withdrawal.
If you participate in the HBP, certain rules limit the deduction of your RRSP contributions made during the 89 day period before you withdrew funds under the HBP. Under these rules, you may not be able to deduct part or all of the contributions made during this period for any year. During that period, you cannot deduct the amount by which the total of your contributions to an RRSP is more than the fair market value of that RRSP after the withdrawal. The same rules apply if you contributed to your spouse's or common-law partner's RRSP during the 89 day period before that individual made the withdrawal from the same RRSP under the HBP. In other words, for contributions made to an RRSP in the 89 day period to be fully deductible, the value of that RRSP after you withdrew funds must be at least equal to those contributions.