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What is the RRSP Home Buyers Plan?


Are you planning to buy a home? The Canada Revenue Agency has made it easier to buy or build a house through the Home Buyers’ Plan under Registered Retirement Savings Plan (RRSP).

Registered Retirement Savings Plan (RRSP) is a plan to save up for retirement by yourself or with your partner. It is a tax-advantaged account which means that the Canadian government introduced this plan to nudge individuals to stash away money for their retirement, and income earned on this plan is not taxed if the money remains parked in the plan.

The Canada Revenue Agency (CRA) doesn’t favor withdrawals from this plan before retirement, except under certain circumstances. And the Home Buyers’ Plan is one such exception.

What is HBP?

The Home Buyers’ Plan (HBP) is a plan through which you can take out funds from your RRSP to buy a house for yourself or for a related disabled person.

Features of the RRSP under HBP

Eligibility: You need to be a first-time home purchaser to be eligible for the Home Buyers’ Plan. According to CRA, it will consider you as a first timer, if you didn’t occupy a home that you or your partner owned in the last four years.

You must be a Canadian resident at the time of fund withdrawal from your RRSPs under the Home Buyers Plan and when your home is bought or built.

Amount: You can withdraw funds up to $35,000 without any tax implications from your Registered Retirement Savings Plan to purchase or build a home for yourself or person with a disability. You need to be related to the person with disability. The withdrawal limit was increased to $35,000 in the Budget 2019 for withdrawals after March 19, 2019.

Repayment: You can repay the withdrawn funds within 15 years. You need to repay from the second year after you made the withdrawal. E.g., if withdrew funds in 2021, you need to make your first repayment in 2022. Also, you can repay the full amount at any time.

Cancellation: While under general conditions, you cannot cancel your participation in the HBP. You can cancel if you did not own or build your home or became a non-resident before you bought or built the home. You need to make the cancellation payments by December 31 of the year after the year you withdrew the funds from your account.

If you are looking to purchase or build a house, you can opt to withdraw funds from Registered Retirement Savings Plan (RRSP) under the Home Buyers Plan without paying taxes.  

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