Using RRSP to buy home - HOME BUYERS PLAN IN CANADA -
My question is: Canadian-specific QUESTION: We have returned from living in the US for the past seven years. We want to buy a house in B.C. and would like to use our RRSP's. Can we do so without being taxed on them?? Thank you for your information. ---------------------------------------------------------------------------david ingram replies;
If you have not owned a home anywhere that you lived in within the last five years, you can withdraw up to $20,000 each from your RRSP without paying tax on the up to $20,000.
If you lived in your own home in the US (or France or Spain or Indonesia, etc.,) you can not.
If you do qualify, you must either
1. pay back one 15th each year for the next fifteen years or
2. report one/fifteenth of the money each year as taxable income for the next fifteen years.
My recommendation is number 2 and use the money you would have paid back to pay down the non-deductible mortgage instead.
Go to www.centa.com and click on the November 2001 Newsletter in the top left hand box for information about how to make your Canadian Mortgage Interest deductible.
The following defines the first time home buyer and is taken from the CRA's 16 page HOME BUYERS PAMPHLET which you can find in total at: http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html#P105_11069
You have to be considered a first-time home buyer
Generally, before you can withdraw funds from your RRSPs to buy or build a qualifying home, you have to meet the first-time home buyer's condition. If you are a person with a disability, or you are acquiring a home for a related person with a disability or helping such a person acquire a home, you may not have to meet this condition. Please refer to the section called "Exception to the first-time home buyer's condition".
You are not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence.
If at the time of the withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer (see example 1).
Example 1
In 2004, Paul sold the home he had
occupied as his principal place of residence for five years. He then
moved into a rented apartment. In 2004, he met Jane and she moved in
with him. Jane had been renting her own apartment, and had never owned
a home.
Jane and Paul were married in August 2007. They wanted to withdraw funds from their RRSPs to participate in the HBP in September 2007. Since Paul owned and occupied his home during the period beginning January 1 of the fourth year before the year he wants to make the withdrawal, he is not considered a first-time home buyer, so he cannot participate in the HBP in 2007. Paul will be able to participate in the HBP in 2009, as he will not have owned a home that he occupied as his principal place of residence since January 1, 2005.
However, Jane is considered a first-time home buyer, since she never owned a home, and she did not live with Paul during the period in which he owned and occupied his home as his principal place of residence. She can participate in the HBP in 2007, providing all the other requirements are met.
If Jane does not participate in the HBP in either 2007 or 2008, Paul can participate in the HBP in 2009. If they want to participate together in the HBP, they both have to wait until 2009 at which time they can withdraw funds under the HBP to buy or build a qualifying home.
david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
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Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax service help.
$1,700 would be for two people with income from two countries
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable. In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years. We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund.
Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files. As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files. It can take us a valuable hour or more to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance.
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