RRSP home buyers’ plan
The RRSP Home Buyers’ Plan allows participants to withdraw $20,000 from their RRSPs to purchase or build a house. No income tax is deducted from these funds, as long as they are repaid to an RRSP according to the government’s repayment schedule.
This brochure includes information on how the plan works, the type of home that qualifies and the RRSP repayment schedule.
- How the Plan Works
You may participate in the plan if you (or your spouse) have not owned a home which you occupied as your principal place of residence in any of the past five calendar years. Generally, you can only participate in the RBSP Home Buyers’ Plan once.Once you enter into an agreement to buy or build a qualifiing home, you may withdraw fiinds from our RRSPs under the plan. You must acquire the home before October of the year following the year of withdrawal. Under certrin circumstances you may be granted an additional year to acquire a quailfying home.After entering the agreement, you must complete Form T1036 which is available from a Revenue Canada district office. Ths form should then be submitted to your RRSP issuer (bank, credit union, life insurance company, trust company or brokerage firm).
Once approved, the form gives you permission to withdraw funds from your RRSP without any taxes being withheld. You may make contributions to the plan from more than one RRSP, as long as the $20,000 limit is not exceeded.
In addition, ifyou have a spouse who is also eligible, you can each withdraw up to $20,000 towards the down payment, for a total of $40,000. You may withdraw money from your RRSP tax-free if that money was deposited at least 90 days prior to withdrawal.
- A Qualifying Home
To participate in the plan, you must enter into an agreement to purchase or construct a home which falls into the following categories:
- It is located in Canada.
- It was acquired not more than 30 days before receiving the withdrawal under the RRSP Home Buyers’ Plan.
- It is intended to be occupied as your principal place of residence within one year after buying or building it.
- Both existing and newly built homes are eligible. They include detached or semidetached homes, townhouses, condominiums, mobile homes or apartments in a duplex, triplex, fourplex or apartment building. Shares in co-operative housing corporations also qualify.
- RRSP Repayment Schedule
The money you withdraw from your RRSP must be repaid over a period of not more than 15 years to retain your tax deferred status. If you choose to pay less than your scheduled annual payments, the amount that you don’t repay must be reported as ificome on your tax return for that year.
In October 1997, you withdraw $15,000 from your RRSP to finance the purchase ofyour home. Your annual repayment for 1999 is $1,000 ($15,000 divided by 15 years) and is due by December31, 1999. If you decide to repay only $700 to your RRSP in 1999:
- the $300 shortfall from your scheduled annual repayment of$1,000 will be included in your income for 1999;
- your outstanding balance will still be reduced by $1,000 from $15,000 to $14,000; and
- your scheduled annual repayment for 2000 will again be $1,000 ($14,000 divided by 14 years).
Your RRSP repayments have to be made on or before December31 of each year. The repayment period begins the second year following the year in which the withdrawal is made. These repayments do not have to be made to the same RRSP from which you withdrew the funds.You do not receive a second tax break when you make an annual payment. So, you must inform your RRSP insurer that it is not a regular contribution and complete an RRSP repayment form, available from any Revenue Canada district office.
Talk to a REALTOR if you would like more information on how to repay your RRSP.