The Home Buyers’ Plan allows Canadian residents who are buying a home, building a qualifying home for themselves or a related person with disability, to withdraw from their RRSPs without tax being withheld. The program was initially introduced in 1992 and it’s a popular feature of RRSPs.
Qualifying for the Program
To qualify for the program, you have to be a Canadian resident and you or your spouse did not own a principal residence during the period beginning January 1st of the fourth year before the year of withdrawal and ending 31 days before the date you withdraw the funds.
Example: If you withdraw funds on March 31st 2019, the four year period begins on January 1, 2015 and end on Feb 28th 2019.
Amount of Withdrawal
In the 2019 budget, the withdrawal limits under the Home Buyers’ Plan went from $25,000 to $35,000 per account holder. As of date, the withdrawal limit is $35,000. Both spouses are eligible to participate, for a combined total of $70,000
Withdrawals under the HBP can also come from a Spousal Registered Retirement Savings Plan (SRSP). The same rules of repayment apply.
Repayment of Withdrawal
Any amount withdrawn must be paid back within 15 years, starting the second calendar year following the year of withdrawal or 60 days following that year.
Keep in mind that the repayment period could be shorter than 15 years if;
- If the participant dies
- If the participant becomes a non resident
- If the participant reaches 72 years of age or older (RRSP converts into a RRIF)
Example: Jeff withdrew $35,000 from his RRSP. Over the next 15 years, he has to contribute a minimum of $2333.33 into his RRSP ($35,000 / 15 = $2333.33). If Jeff forgets to contribute into his RRSP for that particular year, the $2333.33 gets added on top of his income.
A taxpayer can choose to cancel their withdrawal in the Home Buyers’ Plan if they meet all the conditions but have a change of mind such as:
- They do not buy or build a qualifying home or replacement property.
- They become a non resident before purchasing or building the qualifying home.
Home Buyers Plan Withdrawal Form
To proceed with the withdrawal, one would have to complete the T1036 form, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP.
