Using the Home Buyer’s Plan
The Home Buyer’s Plan (HBP) is a government offered program that allows prospective home buyer’s to utilize their RRSP contributions to assist in the purchase of a home (to be used for the down payment and/or the closing costs of your home purchase).
To utilize this program you must meet the eligibility criteria.
That criteria stipulates that an individual can access the HBP program if you are a First Time Home Buyer (FTHB). To qualify as an FTHB, you must not have occupied a home that you and/or your current spouse, or common-law partner, owned in the last four year period.
- • Four year period starts Jan 1st of the fourth year prior to the year of withdrawal and ends 31 days prior before the date you withdraw funds. (i.e. March 31, 2018 withdrawal date requires you to not be an owner from January 1st, 2014 through Feb 28, 2018)
Additionally, if you have previously utilized the HBP program, you must have repaid that withdrawal in full by January of the year you wish to use the HBP program for the second time.
- • If you are purchasing a home October 2018, you must have repaid your previous HBP withdrawal in FULL by January 1st, 2018).
You must also meet the RRSP withdrawal conditions;
- • Must be a Resident of Canada
- • You must have received, or considered to have received, all withdrawals from in the same calendar year.
- • You cannot withdraw in excess of $25,000
- • Only the individual who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdraw amounts of $25,000 or less.
- • Normally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.
- • RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP.
- • You have to buy or build a qualifying home for yourself before October 1st of the year after the year of the withdrawal.
- • Complete Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.
If you qualify for the usage of the HBP, then you need to know how to withdraw the funds from your RRSP acount(s).
To withdraw funds from your RRSPs under the HBP, fill out Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP. You have to fill out this form for each withdrawal you make. After filling out Area 1 of Form T1036, give it to your RRSP issuer. The issuer must fill out Area 2. You can withdraw a single amount or make a series of withdrawals in the same calendar year.
Once you have withdrawn your funds, you will be required to pay back that “borrowed” amount in full if you want to avoid incurring additional costs.
Repayment of HBP Withdrawal
You will be required to repay the full amount of your withdrawal, but the repayment isn’t required right away. You only have to start repaying that amount the second year after the year you withdrew from the RRSP Account.
Generally speaking you have up to 15 years to repay the full amount of the original withdrawal, but you are entitled to repay the amount in full at any time prior to that 15 year mark.
Each year, the Canada Revenue Agency (CRA) will send you a HBP statement of account, with your notice of assessment or notice of reassessment. The statement will include:
- • The amount you have repaid so far (including any additional payments and amounts you included on your income tax and benefit return because they were not repaid);
- • Your remaining HBP balance; and
- • The amount you have to contribute to your RRSP(s), PRPP or SPP and designate as a repayment for the following year.
A very important part of repaying your HBP withdrawal is to make sure you designate your contribution as a repayment. To do this, you must fill out a Schedule 7, and enter the amount of the repayment on line 246 and attach it to your income tax and benefit return. You have to fill out and send the CRA an income tax and benefit return until you have repaid all of your HBP withdrawals or included them in your income. If at any point, you choose to repay more in a fiscal year than you are required, the CRA will adjust the future annual amounts owing based on the remaining amount due.
If you have any other questions about the Home Buyer’s Plan, please feel free to contact me any time.
*Source information from https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html