Description

Federal program which enables RRSP holders to each withdraw up to $20,000, tax free, from their RRSP to purchase homefor yourself or a related person with a disability.

Eligibility of the Person

• Must be an RRSP holder under which you are the annuitant
• Must be a resident of Canada at time of withdrawal and until purchase completed
• Generally must be first time home buyer, which includes someone (or their spouse or common-law partner) who has not owned and occupied a home as their principal residence within the period of time beginning January 1 of the fourth year before the year of withdrawal, and ending 31 days before your withdrawal
• Can only withdraw funds after entering into a written agreement to buy a home
• Must complete a T-1036 form
• Must receive all withdrawals in the same year
• Uou can withdraw a single amount or make a series of withdrawals throughout the same year, provided that the total of your withdrawals is not more than $20,000
• If you purchase a home together with your spouse or common-law partner, or with other individuals, each person can withdraw up to $20,000 towards the purchase of the home
• Your HBP balance on January 1 of the year of withdrawal must be zero.

• The home must be intended to be occupied within 1 year after closing as a principal place of residence.
• Must close purchase before October 1 of the year following the year that funds are withdrawn, i.e. if funds are withdrawn March 1st, 2005, you must close your purchase before October 1, 2006 (there are possible extensions of this deadline)
• Can be a new or re-sale home

• Withdrawn amount is to be repaid over the next 15 years – a minimum of 1/15 must be repaid annually, otherwise the amount due for the year will be included in your income for that year
• Your repayment period starts the second year following the year you made your withdrawals (ie. the first annual repayment for monies withdrawn in 2007 would be payable in 2009)
• If contributions are made to RRSP less than 90 day immediately before they are withdrawn under the HBP, then they are not tax deductible
• You must make your HBP withdrawals no later than 30 days after the closing date in order to participate in the plan and have the withdrawal be considered as tax-exempt

Note:

• Strategies include combining HBP with CMHC-insured mortgage to reduce the mortgage insurance premium required, and utilizing unused RRSP contribution room, if available.

May be used again after prior HBP loan repaid.

More information at:

http://www.cra-arc.gc.ca/E/pub/tg/rc4135/README.html