RRSP Home Buyer's Plan - Use your RRSP to help buy or
build a home
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 has been increased to
$25,000 by the Federal
2009 Budget, which also announced a new First-Time Home Buyers' Tax
Credit. This change is now in effect, as it was included in Bill C-10,
which received Royal Assent on March 12, 2009.
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withdrawn, and the withdrawal amount will not be included in your income.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are withdrawn.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.
Can funds be used to buy land on which the qualifying
home will be built?
The Income Tax Act does not specify that the funds
withdrawn must be used to pay for the house that is being built. It
specifies that the amount withdrawn must be received as a result of making
a written request in a prescribed form. The form is T1036
- Home Buyer's Plan (HBP) Request to Withdraw Funds from an RRSP.
The taxpayer must provide the address of the qualifying home being bought
or built, and must assert that a written agreement has been entered into
for the purchase or building of the qualifying home (not for the purchase
of land). If all conditions to participate in the HBP are satisfied,
the funds can be used for any purpose. See the topic
"Can
I use funds withdrawn under the HBP for other purposes?" in the CRA
publication RC4135 Home Buyer's Plan Guide.
Tax Tips:
Take advantage
of the Home Buyer's Plan.
Make sure you
complete Schedule 7 if you have made repayments to the HBP or LLP, otherwise you lose
RRSP deduction room.
The information on this site is not intended to be a
substitute for professional advice. Each person's situation differs, and
a professional advisor can assist you in using the information on this web
site to your best advantage.
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