To be eligible to participate in the Home Buyers’ Plan, certain conditions must be met.
Note: Even if you or your spouse have previously owned a home, you may still be considered a first-time home buyer. This is because you are considered a first-time home buyer if, in a four-year period, you did not occupy a home that you, your current spouse, or common-law partner owned.
There are other factors to consider when it comes to eligibility for the Home Buyers’ Plan, including buying or building a home for a related person with a disability or what happens in the case of separation from your partner. See more on CRA website.
How to Participate in the Home Buyers’ Plan
If you meet the eligibility criteria and have entered into an agreement to purchase your first home, the next step is to fill out the Home Buyers’ Plan request form (Form T1036) ahead of your closing date. Additionally, you’ll want to review your RRSP investments to make sure that they are eligible for withdrawal. It is important that you understand your bank’s requirements ahead of requesting the withdrawal (e.g., time needed to sell investments) to avoid delays. It is also important to know that Home Buyers’ Plan withdrawals must be completed in the same calendar year.
Once the money is withdrawn from your RRSP and deposited in your account, you can use it toward your down payment. Make sure to factor in time to get all of your down payment funds together ahead of your closing date.
A withdrawal from the plan can be done up to 30 days after your closing date. After 30 days, you are no longer eligible to make the withdrawal under the Home Buyers’ Plan.
The Home Buyers’ Plan allows first time home buyers to use a portion of the money they’ve contributed toward their RRSP for a down payment on a home – the withdrawn money will need to be paid back over 15 years into an RRSP account. If you do not make your annual HBP minimum payment, the minimum amount is added to your taxable income for that year. In 2019, the withdrawal limit was increased to $35,000 per individual. This means that, where both spouses have an RRSP, a couple can withdraw up to $70,000 with this plan.
Normally, funds withdrawn from a Registered Retirement Savings Plan (RRSP) are included in your overall income and are subject to tax. However, withdrawals from an RRSP that meet all applicable HBP conditions are not considered income and are not taxed at the time of HBP withdrawal. This is because at least 1/15 of the total amount is due every year and any shortfall in this repayment is added towards RRSP income and becomes taxable.
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