RRSP Home Buyers’ Plan (HBP)
The government of Canada’s Home Buyers’ Plan allows qualified buyers to withdraw a maximum of $25,000 tax free from their RRSP’s to purchase or build a house. If your spouse is also eligible, you can each withdraw up to $25,000 towards the downpayment, for a total of $50,000. No income tax is deducted from these funds, as long as they are repaid to the RRSP according to the government’s 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 residence in the last five years.
Repayment Schedule - The money you withdraw from your RRSP must be repaid over a period of no more than 15 years to retain its tax deferred status. Your repayment period starts the second year following the year you made your withdrawls. If you pay less then your scheduled annual payments, the amount that you don’t repay must be reported as income on your tax return for that year.
For example, in October 2009 you withdraw $24,000 from your RRSP to finance the purchase of your home. Your first annual repayment of $1,600 ($24,000 divided by 15 years) is due by December 31, 2011.