What is the RRSP Home Buyers’ Plan?

The Home Buyers’ Plan (HBP) is an excellent program under which First-Time Home Buyers can, generally, withdraw up to $25,000 from their registered retirement savings plan (RRSP) to buy or build a qualifying home.

Withdrawals that meet all applicable HBP conditions do not have to be included in your income, and your RRSP issuer will not withhold tax on these amounts. However, before you can withdraw funds you must have entered into a written agreement to buy or build a qualifying home, and you must occupy no later than one year after buying or building the home.

If you buy the qualifying home together with your spouse or other individuals, each of you can withdraw up to $25,000. Couples — including common-law — will be able to withdraw up to $50,000.

Keep in mind you have to meet the first-time buyer’s condition. 

You’re considered to be a first-time buyer if, during the four calendar years prior to the year of withdrawal and up to 30 days before the withdrawal, neither you nor your spouse or common-law partner owned a home in which either of you resided. Loan repayments must take place over a period of 15 years, or less if desired, beginning in the second year following the year of withdrawal. If the required repayment is not made, an amount will have to be included as income in the year of the shortfall.

A special rule denies a tax deduction for contributions to an RRSP that are withdrawn within 90 days of the RRSP deposit being made. Consequently, to get the normal tax break for a contribution and to use those funds under the plan, the money must be in your RRSP for at least 90 days before a withdrawal is made.

Persons with disabilities

If you’re already a homeowner and you have a disability, or if you’re a relative of a person who has a disability, you may withdraw funds from your RRSP under the HBP if the withdrawal is to assist you or your disabled relative to purchase a home.

Some conditions must be met first:
  • You or your disabled relative must qualify for the disability tax credit (DTC).
  • The home must be more accessible or better suited for the care of the person with a disability.
  • If you are not disabled, your disabled relative must live in the home or plan to occupy it within one year after the acquisition.
You can participate in the HBP more than once if:
  • Your HBP balance for your previous participation is zero on January 1st of the year you want your new participation in the HBP to occur
  • You meet the first-time buyer’s condition and all other HBP conditions that apply to your situation.

For more detailed information on how to participate in the Home Buyers’ Plan you can read the Canada Revenue Agency article on the topic here or you can send me an email and we can set up a time to talk through it in further detail.