The Home Buyers’ Plan (HBP) in Ontario is a program under which you can, generally, withdraw up to $35,000 from your registered retirement savings plan (RRSPs) to buy or build a qualifying home.
Purchasing a home can be an exciting yet daunting experience, especially if it’s your first time. The good news is that the government has a program in place to help ease the burden. The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home.
In this post, we will take a closer look at what the Home Buyers’ Plan is, who is eligible, and how it works.
What is the Home Buyers’ Plan (HBP)?
The Home Buyers’ Plan is a program under which you can withdraw up to $35,000 from your RRSP to buy or build a qualifying home. Withdrawals that meet the conditions set by the program 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 that you must occupy no later than one year after buying or building it. If you buy the home together with your spouse or other individuals, each of you can withdraw up to $35,000, providing a total of up to $70,000 tax-free.
Who is eligible for the Home Buyers’ Plan (HBP)?
To be eligible for the Home Buyers’ Plan, you must meet the first-time homebuyer condition. You are not considered a first-time homebuyer if you or your spouse owned a home that you occupied as your principal place of residence in the past five years. This five-year period is determined by the four years preceding the year you make your withdrawal, plus the period in the year you make your withdrawal ending 31 days before your withdrawal.
How does the Home Buyers’ Plan (HBP) work?
Withdrawals made under the Home Buyers’ Plan do not have to be included in your income, as long as the funds are repaid into an RRSP in the future. The 15-year repayment period will begin in the second calendar year following the calendar year in which the withdrawal is made. Additionally, a qualifying home must generally be acquired before October 1 of the calendar year following the year of withdrawal. For example, if you make a withdrawal under the plan in 2009, you will have until October 1, 2010, to acquire a qualifying home, and your first annual repayment will be due by the end of 2011 or the first two months of 2012.
How long must money be in the RRSP before a withdrawl?
It’s important to note that 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.
The Home Buyers’ Plan is a fantastic program for first-time homebuyers looking to purchase or build their dream home. It allows you to withdraw up to $35,000 from your RRSP tax-free, providing much-needed financial assistance in the home-buying process.
Just remember to meet the first-time homebuyer condition, acquire a qualifying home before October 1 of the calendar year following the year of withdrawal, and ensure that the money has been in your RRSP for at least 90 days before a withdrawal is made.
To read more details on the RRSP Home Buyers Plan visit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html
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