What is the Home Buyer's Plan (HBP)?
Key takeaways
- Under the Home Buyers Plan, you can withdraw up to $35,000 from your RRSP to help buy or build an eligible home
- This home can be for you, or for a related person with a disability.
- You can start repaying your RRSP withdrawal at any time and have up to 15 years to repay the HBP.
An introduction to the Home Buyers Plan
The Home Buyers Plan or HBP is a program that allows you to withdraw funds from your Registered Retirement Savings Plan(RRSP) and use this money to build a home.
Through the HBP, you can pay back the withdrawn funds within a 15-year period. This home must be for yourself or related person with a disability, and there are other eligibility requirements to meet. You can withdraw a maximum of $35,000 tax-free, and you’ll have to declare any money over this amount as income on your tax return.
Who is eligible to participate in the Home Buyers Plan?
Firstly, you should check if you’re eligible to participate with the RRSP you currently have, as some products such as
locked-in or group RRSPs don’t allow you to withdraw funds.
You must also meet other conditions, including:
• You must be considered a first-time home buyer.
• You must be buying or building a qualifying home for either yourself, or for a related person with a disability.
• You must be a resident of Canada from the time you withdraw funds up until the qualifying home has been bought or built.
• You must intend for the home to be your principal residence within 1 year of buying or building it. If you’re buying or building a home for a family member with a disability, then they must live in it as their principal residence within 1 year.
How to use funds from your RRSP
To withdraw funds from your RRSP, you’ll need to fill out Form T1036,Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP. You’ll need to fill in some parts of this form, and your RRSP issuer will have to complete a section, too.
You can withdraw a one-time lump sum or make a series of withdrawals in the same calendar year, but you’ll need to complete and submit this form to your RRSP provider each time you make a withdrawal. You can withdraw the funds from more than 1 RRSP, provided you’re the owner of each account.
It’s important to note that by participating in the Home Buyers Plan, you may be subject to certain rules that limit the deduction of your RRSP contributions you made during the 89-day period before you withdrew funds. These rules mean you may be able to deduct part or all of the contributions made during this period for any year.
How to repay funds into your RRSP
You can see the amount owing on your Home Buyers Plan balance online using the government’s MyCRA app, or on the account statement that will be sent to you by the Canada Revenue Agency each year.
This statement includes:
• The amount you’ve paid back so far
• The remaining balance to be paid
• The amount you’ll need to contribute to your RRSP(s) and designate as a repayment for the following year
To make a repayment, you’ll need to make a contribution to your RRSP(s) in the year the repayment is due, or in the first 60 days of the year after. Once you’ve made your contribution, you can designate all or part of it as a repayment under the Home Buyers Plan.
There may be special repayment situations that could arise, such as if you reach age 71, die, or become a non-resident during your repayment period. There are options available should any of these things occur, but in normal circumstances, your repayment period starts the 2nd year after you withdrew the funds, and you have up to 15 years to repay your RRSP. You can choose to repay the full amount at any time.
Can you exit the Home Buyers Plan?
Unless there are extenuating circumstances, you can’t cancel your participation in the HBP once you’ve started to withdraw funds.
You may be able to cancel however if:
- You didn’t buy or build a qualifying home.
- You became a non-resident before buying or building your home.
- You withdrew funds to help a related person with a disability and that person didn’t buy or build a qualifying home.
- You became a non-resident before that person bought or built a qualifying home.
If you choose to cancel your participation and repay the full amount into your RRSP, the withdrawal won’t be taxed. Any amount that isn’t repaid must be declared as income on your tax return for the year you made the withdrawal.
To cancel your participation, you’ll need to:
• Make a cancellation payment(s) to an existing or new RRSPs by the due date.
• Notify the CRA in writing of your intent to cancel, explaining the reason you’re no longer participating in the HBP.
• Complete Form RC471, Home Buyers’ Plan (HBP) Cancellation.
• Send the receipts for your cancellation payment(s) and any repayments, along with the letter and your completed Form RC471, to the CRA.
You can find out more about cancelling your participation in the Home Buyers Plan, along with where to send your documents via the Government of Canada.
What’s next?
• Starting the year you make your first Home Buyers Plan withdrawal, you’ll need to file an income tax and benefit return – Opens in a new window every year until you’ve repaid all your withdrawals.
• Remember that you’ll need to keep all supporting documents for 6 years in case the CRA asks to see them.
Click below to see if you qualify for the Home Buyers Plan.
