What is the Home Buyer’s Plan?
The home buyer’s plan allows for each individual that is going on the title of the property to withdrawal up to $25,000 from their RRSPs to go towards the down payment on the new purchase. This means that if 2 people are going on the title of the property, then you can withdrawal up to $50,000, $25,000 per person, to go towards the down payment on the new purchase.
The withdrawals for this program are not considered as income in the year that this has been taken advantage of.
What are the Requirements?
When purchasing a home, you must either be a first time home buyer, or have not owned a home for a qualified period of time. The withdrawal for the down payment on the property must close within the same calender year.
The money in the RRSP must have been in the RRSP for a minimum of 90 days. You can withdrawal the money all at once or for a series of multiple withdrawals.
Do I have to repay the money back to my RRSP
Yes, you will have up to 15 years to repay the money to your RRSP. You are required to start repaying in the second year following the year you made the withdrawal from the RRSP. You will be required to repay 1/15 of the amount you withdrew annually until the amount is repaid. There is no tax liability if you only repay the minimum back to your RRSP.
Usually, your income levels will increase over the years, so it would be beneficial for you to pay the money back faster. This is because as your income level increases, then it is more advantageous for you to take advantage of RRSPs.
Until the money is repaid, then you cannot put money into your RRSPs to reduce your taxes at tax time.
This program is a great way to get a down payment on a new purchase; however, if you frequently put money into your RRSPs to reduce your taxes, then you will have to be aware that you will not be able to take advantage of RRSPs until the money you had withdrawan is paid off.
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