Using your RRSP Home Buyer’s Plan to purchase a home
The RRSP (Registered Retirement Savings Plan) Home Buyers' Plan is a government of Canada plan for allowing Canadians to withdraw money, tax free, from their retirement savings plans.
This information is a summary. Current guidelines, expanded details and government forms are available on their website at http://www.ccra-adrc.gc.ca/E/pub/tg/rc4135eq/rc4135eq.html
Formerly restricted to first-time home owners, in 1999 the federal government opened this plan up to some previous home owners, as well as first-time home owners.
A definition of three terms, as they apply to the Home Buyers' Plan.
QUALIFYING HOME
A qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed.
Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings, are all qualifying homes.
SPOUSE
This term applies to a person to whom you are legally married, or with whom you are living common law.
'Living common law' applies when you live and have a relationship with a person of the opposite sex to whom any of the following applies.
He or she:
has been living common law with you for at least 12 continuous months
lived with you previously as your spouse for at least 12 continuous months, and you are living together again
is the natural or adoptive parent of your child
The above includes any period that you were separated for less than 90 days because of a breakdown in the relationship.
DISABLED PERSON
Revenue Canada considers a person to be disabled if one of the following situations applies:
the person was entitled to the disability deduction on line 316 of the person's return for the year before the Home Buyers' Plan withdrawal, and still meets the eligibility requirements for the disability deduction when the Home Buyers' Plan withdrawal is made.
OR
if the person was not entitled to the disability deduction for any year before the Home Buyers' Plan withdrawal, a Form T2201, Disability Tax Credit Certificate, certified by a medical doctor or appropriate medical practitioner (i.e., an optometrist, audiologist, psychologist, or occupational therapist), is filed with Revenue Canada for the year of the Home Buyers' Plan withdrawal.
If Form T2201 is not approved, withdrawals will not be considered eligible under the Home Buyers' Plan and they will have to be included as taxable income for the year.
Home Buyer Plan RRSP Withdrawal Limit Increase - $25,000!
SUMMARY
The 2009 Federal Budget introduced the following changes affecting Retirement Savings Plans (RSP):
- The Home Buyers’ Plan (HBP) maximum withdrawal limit has been increased to $25,000 from $20,000 for withdrawals made after January 27, 2009.
ADDITIONAL INFORMATION
How much can I withdraw from my RRSP under the HBP?
For withdrawals made after January 27, 2009, the maximum amount that you can withdraw from your RRSP to purchase or build a qualifying home without having to pay tax on the withdrawal is $25,000.
If I withdrew $20,000 from my RRSP under the HBP after December 31, 2008, but on or before January 27, 2009, can I withdraw an additional $5,000 from my RRSP?
Yes, you can withdraw additional funds, as long as the total of all your withdrawals does not exceed the new maximum amount of $25,000. However, under existing requirements, neither you nor your spouse or common-law partner can own the qualifying home for more than 30 days before making the final withdrawal.
Click on the following links for more information on The Home Buyer’s Plan or the First Time Home Buyer’s tax credit;
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
http://www.cra-arc.gc.ca/E/pub/tg/rc4135/README.html
http://www.cmhc-schl.gc.ca/en/co/buho/buho_008.cfm#HBP
http://www.cmhc-schl.gc.ca/en/co/buho/buho_008.cfm#FTHB