Tax Season's Here! Know the 3Rs for Your Home Buyer’s Plan

TOPIC

Financials

Author

Yiming Han

Home Buyer’s Plan (HBP)

For some first-time homebuyers, the Registered Retirement Savings Plan (RRSP) is a great source of downpayment. The Canadian Revenue Agency (CRA) allows eligible individuals to withdraw up to $35,000 (increased from $25,000 after March 19, 2019) from their RRSP tax-free under the Home Buyer Plan (HBP).

Essentially, HBP allows you to make a 15-year loan to yourself from your RRSP. Since it is considered a loan, you will need to pay it back. You can choose to repay the full amount into your RRSP at any time, but you have up to 15 years to pay it back.

Here are the 3Rs you need to know about HBP

Repay

Since the HBP is considered a loan, you will need to pay it back. You can start making your RRSP repayment after the second year of your first withdrawal. The annual repayment amount is the total fund withdrawn divided by 15 years.

For example, if you withdrew the full amount of $35,000, the yearly repayment is $2,333.33 ($35,000/15 years).

Report

You can find your repayment and outstanding balance on CRA. Starting the first year of repayment, you are expected to fill out and send the CRA an income tax and benefit return every year until you repay the loan fully.

Repeat

Download Schedule 7, RRSP, PRPP, and SPP Unused Contributions, Transfers, and HBP or LLP Activities
Fill out Schedule 7 and enter the amount of the repayment on line 24600
Attach Schedule 7 to your Income Tax and Benefit Return
Remember to do these steps every year when filing your taxes until the HBP is fully repaid