The Home Buyers’ Plan (HBP) is a program from the Federal government that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.
Generally, you have up to 15 years to repay to your RRSP(s) the amounts you withdrew from them under the HBP. However, you can repay the full amount into your RRSP or PRPP at any time. You cannot claim as a deduction on your income tax return an amount you designated as a repayment.
Here’s An Idea: If you know you are buying your first home in the next 90 days, you make a $25,000 contribution or $50,000 for two people. That means a big refund in April especially if you are in a higher tax bracket. Remember, the RRSP funds has to be in the plan for 90 days before you can take it out.
For example, say you and your spouse are in the 39.41% tax bracket. And you have $50,000 saved to put towards your downpayment. You each put $25,000 into a GIC Based – RRSP Mutual Fund. This will generate a tax refund of $19,705 which you can use towards your downpayment. You then also withdraw the $50,000 to pay for that home. You now have $69,705.
|Taxable Income||Tax Brackets & Rates|
|Up to $40,922||20.05%|
|$40,923 to $44,701||24.15%|
|$44,702 to $72,064||31.15%|
|$72,065 to $81,847||32.98%|
|$81,848 to $84,902||35.39%|
|$84,903 to $89,401||39.41%|
|$89,402 to $138,586||43.41%|
|$138,587 to $150,000||46.41%|
|$150,001 to $220,000||47.97%|
|$220,001 and Over||49.53%|
You will still have to pay back the funds to an RRSP eligible investment within 15 years – see the module on RRSP Mortgages for alternative options.