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My question is: Canadian-specific
QUESTION: CAN MY HUSBAND AND I USE OUR RRSP'S (TOTAL
AMOUNT) FOR A DEPOSIT ON A HOUSE. WE DO NOT
HAVE A HOME BUYERS PLAN & THIS IS NOT OUR
FIRST HOUSE PURCHASE. THIS WILL BE OUR FINAL
RETIREMENT HOME & WE WILL HAVE IT BUILT TO=20
SUIT OUR NEEDS. WHAT ARE THE PRO'S AND CONS=20
OF THIS, IF WE CAN DO IT. ?
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david ingram replies:
The details about buying under the homebuyer's plan can be found in a =
pdf or html file at:
http://www.ccra-adrc.gc.ca/E/pub/tg/rc4135/README.html
I have reproduced the rules for the time you have to have been without a =
home if you wish to use the homebuyer's plan. You are limited to =
$20,000 each as a withdrawal without paying tax and you have to repay it =
over a fifteen year period. Any year you do not repay 1/15th of the =
amount of your withdrawl, you have to pay tax on that amount.
It is a valid use of your RRSP and likely a better investment than =
anything else you can do.
Home Buyers' Plan (HBP)
RC4135(E) Rev. 01
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La version fran=E7aise de cette publication est intitul=E9e =
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This document is also available for download in other formats.
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Table of Contents
a.. Your opinion counts!=20
b.. Before You Start=20
a.. Is this guide for you?=20
b.. What is the HBP?=20
c.. Do you need more information?=20
d.. Forms and Publications=20
e.. Internet access=20
c.. Glossary=20
d.. Chapter 1 - Participating in the HBP=20
a.. What is the HBP?=20
a.. Can a withdrawal be made from any RRSP?=20
b.. What are the conditions for participating in the HBP?=20
a.. You have to enter into a written agreement to buy or =
build a qualifying home=20
b.. You have to intend to occupy the qualifying home as your =
principal place of residence=20
c.. You have to be considered a first-time home buyer=20
d.. Your HBP balance on January 1 of the year of withdrawal =
has to be zero=20
e.. Neither you nor your spouse or common-law partner can =
own the qualifying home more than 30 days before the withdrawal=20
f.. You have to be a resident of Canada=20
g.. You have to complete Form T1036=20
h.. You have to receive all withdrawals in the same year=20
i.. You cannot withdraw more than $20,000=20
j.. You have to buy or build the qualifying home before =
October 1 of the year after the year of withdrawal=20
k.. How do you make an HBP withdrawal?=20
l.. You have to file a tax return=20
e.. Chapter 2 - Repaying your withdrawals=20
a.. How do you make your repayments?=20
b.. What happens if you choose to begin your repayments =
earlier?=20
c.. What happens if you repay more than the amount you have to =
repay?=20
d.. What happens if you repay less than the amount you have to =
repay?=20
e.. Situations where the repayments have to be made in less =
than 15 years=20
a.. If the participant dies=20
b.. If you become a non-resident=20
c.. If you are 70 years of age or over=20
f.. Chapter 3 - Other rules you should know=20
a.. What happens if you do not meet all the HBP conditions?=20
a.. Cancelling your participation=20
b.. If you cannot participate in the year, can you participate =
in a later year?=20
c.. Can you use funds withdrawn under the HBP for other =
purposes?=20
d.. Can you participate in the Lifelong Learning Plan (LLP) at =
the same time?=20
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Your opinion counts!
We review our income tax guides and pamphlets each year. If you =
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we'd like to hear from you!
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Place Vanier - Tower A
Ottawa ON K1A 0L5
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Before You Start
Is this guide for you?
Use this guide if you want information about the rules that apply =
to the Home Buyers' Plan (HBP).
What is the HBP?
The HBP is a program that allows you to withdraw up to $20,000 =
from your registered retirement savings plans (RRSPs) to buy or build a =
qualifying home. Withdrawals that meet all applicable HBP conditions do =
not have to be included in your income, and your RRSP issuer will not =
withhold tax on these amounts. If you buy the qualifying home together =
with your spouse or common-law partner, or other individuals, each of =
you can withdraw up to $20,000.
Under the HBP, you have to repay all withdrawals to your RRSPs =
within a period of no more than 15 years. Generally, you will have to =
repay an amount to your RRSPs each year until you have repaid all the =
amount you withdrew. If you do not repay the amount due for a year, it =
will be included in your income for that year.
Do you need more information?
In this guide, we use plain language to explain the most common =
income tax situations. If you need more information after reading this =
guide, contact the General Enquiries section of your tax services =
office. You can find the address and telephone numbers in the government =
section of your telephone book. They are also available on our Web site =
under the heading "Contact us" at www.ccra.gc.ca.
Forms and Publications
Throughout the guide, we refer to other forms and publications. =
You can get these documents from any tax services office or tax centre, =
or by calling us toll free at 1-800-959-2221.
Internet access
You can find most of our publications at www.ccra.gc.ca on the =
Internet.
Glossary
This glossary gives you a general description of the technical =
terms that we use in this guide.
Common-law partner - This refers to a person of the opposite or =
the same sex who is not your spouse (see the definition of spouse on the =
next page) when you live and have a relationship with that person. In =
addition, at least one of the following has to apply. He or she:
a.. is the natural or adoptive parent (legal or in fact) of your =
child;=20
b.. has been living and having a relationship with you for at =
least 12 continuous months; or=20
c.. lived with you previously as your spouse for at least 12 =
continuous months.
The above includes any period that you were separated for less =
than 90 days because of a breakdown in the relationship.
Disabled person - For purposes of the HBP, a disabled person =
includes you or a person related to you by blood, marriage, or adoption, =
if you or the related person are entitled to the disability amount for =
the year of the HBP withdrawal. A related disabled person does not have =
to reside with you in the same home.
We consider a person to be entitled to the disability amount if =
one of the following situations applies:
a.. the person was entitled to the disability amount on line 316 =
of the person's return for the year before the HBP withdrawal, and still =
meets the eligibility requirements for the disability amount when the =
HBP withdrawal is made; or=20
b.. if the person was not entitled to the disability amount for =
any year before the HBP withdrawal, a Form T2201, Disability Tax Credit =
Certificate, that a medical doctor or appropriate medical practitioner =
(i.e., an optometrist, audiologist, psychologist, or occupational =
therapist) has certified, is filed for the person for the year of the =
HBP withdrawal. If Form T2201 is not approved, your withdrawals will not =
be considered eligible withdrawals under the HBP and they will have to =
be included in income for the year.
If all other eligibility requirements are met, we consider a =
person to be entitled to the disability amount even if costs for an =
attendant or for care in a nursing home were claimed as a medical =
expense by or on behalf of that person.
Eligible withdrawal - This is an amount you withdraw from your =
RRSP that meets all HBP conditions that apply to your situation.
HBP balance - When you withdraw funds from your RRSPs under the =
HBP, you create an HBP balance. Your HBP balance at any time is the =
total of all eligible withdrawals you made from your RRSPs minus the =
total of all amounts you designated as an HBP repayment and the amounts =
included in your income (because they were not repaid to your RRSPs), in =
previous years.
Participant - You are considered an HBP participant if:
a.. you make an eligible withdrawal from your RRSP to buy or =
build a qualifying home for yourself;=20
b.. for 1999 and future years, you make an eligible withdrawal =
from your RRSP under the HBP to buy or build a qualifying home for a =
related disabled person or to help such a person buy or build a =
qualifying home; or=20
c.. you are the spouse or common-law partner of a deceased HBP =
participant and you elected to continue making the repayments for the =
deceased participant.
Participation period - Your HBP participation period starts on =
January 1 of the year you receive an eligible withdrawal from your RRSP =
and ends in the year your HBP balance is zero.
Qualifying home - A qualifying home is a housing unit located in =
Canada. This includes existing homes and those being constructed. =
Single-family homes, semi-detached homes, townhouses, mobile homes, =
condominium units, and apartments in duplexes, triplexes, fourplexes, or =
apartment buildings, all qualify. A share in a co-operative housing =
corporation that entitles you to possess, and gives you an equity =
interest in, a housing unit located in Canada also qualifies. However, a =
share that only provides you with a right to tenancy in the housing unit =
does not qualify.
RRSP deduction limit - This refers to the maximum amount you can =
deduct for contributions you made to your RRSP or to your spouse's or =
common-law partner's RRSP.
Spouse - You have a spouse when you are legally married. You still =
have a spouse if you are living apart for reasons other than a breakdown =
of your relationship.
Chapter 1 - Participating in the HBP
What is the HBP?
The HBP is a program that allows you to withdraw up to $20,000 =
from your registered retirement savings plans (RRSPs) to buy or build a =
qualifying home. The home can be for yourself or it can be for a related =
disabled person if one or both of the following applies:
a.. it is more accessible to that person than his or her current =
home; or=20
b.. it is better suited to that person's needs.
You can acquire the home for the disabled person, or you can =
provide the withdrawn funds to the disabled person to acquire the home.
You do not have to include eligible withdrawals in your income, =
and your RRSP issuer will not withhold tax on these amounts. You can =
withdraw a single amount or make a series of withdrawals throughout the =
same year, provided the total of your withdrawals is not more than =
$20,000. If you buy the qualifying home together with your spouse or =
common-law partner, or other individuals, each of you can withdraw up to =
$20,000.
You have to repay all withdrawals to your RRSPs within a period of =
no more than 15 years. Generally, you will have to repay an amount to =
your RRSPs each year until you have repaid all the amount you withdrew. =
If you do not repay the amount due for a year, it will be included in =
your income for that year.
Can a withdrawal be made from any RRSP?
You can only withdraw funds from an RRSP under which you (the =
participant) are the annuitant. If your spouse or common-law partner =
contributed to your RRSP, you are the annuitant of the RRSP, even if =
your spouse or common-law partner deducted the contributions from =
taxable income. If you contributed to your spouse's or common-law =
partner's RRSP, that individual is the annuitant of the RRSP, even if =
you have deducted the contributions from your income.
Some RRSPs, such as locked-in or group RRSPs, do not allow you to =
withdraw funds from them. Your RRSP issuer can give you more information =
about the types of RRSPs that you have and whether or not withdrawals =
under the HBP can be made from them.
Note
If you withdraw an amount from an RRSP to which you made a =
contribution during the 89-day period just before your withdrawal, you =
might not be able to deduct the contribution you made. For more =
information, see "How do you make an HBP withdrawal?".
What are the conditions for participating in the HBP?
A number of conditions have to be met to participate in the HBP. =
While some conditions have to be met before you can withdraw funds from =
your RRSPs, others apply when or after you receive the funds.
If you participate in the HBP, you have to meet all the HBP =
conditions yourself. However, depending on your situation, some =
conditions may have to be met by another person. For example, if you =
withdraw funds from your RRSPs to help a related disabled person buy or =
build a qualifying home, some conditions have to be met by that person.
Regardless of the situation, you are responsible for making sure =
that all HBP conditions are met. If at any time during your =
participation period a condition is not met, your withdrawal will not be =
considered an eligible withdrawal and it will have to be included in =
income for the year you received it.
The following chart lists all the HBP conditions and who has to =
meet them in different situations. We explain each condition in greater =
detail in the pages that follow the chart.
Conditions for participating in the HBP
=20
Situation 1 - You buy or build a qualifying home for =
yourself.
Situation 2 - You, a disabled person, buy or build a =
qualifying home for yourself.
Situation 3 - You buy or build a qualifying home for a =
related disabled person.
Situation 4 - You help a related disabled person buy =
or build a qualifying home.
=20
Situation
1
2
3
4
=20
Person responsible for meeting the HBP conditions
=20
You
=20
You
=20
You
Related
disabled
person
=20
You
Related
disabled
person
=20
Conditions you have to meet before applying to =
withdraw funds under the HBP
=20
You have to enter into a written agreement to buy or =
build a qualifying home.
=20
x
=20
x
=20
x
=20
N/A
=20
N/A
=20
x
=20
You have to intend to occupy the qualifying home as =
your principal place of residence.
=20
x
=20
x
=20
N/A
=20
x
=20
N/A
=20
x
=20
You have to be considered a first-time home buyer.
x=20
N/A
N/A
N/A
N/A
N/A
=20
Your HBP balance on January 1 of the year of =
withdrawal has to be zero.
=20
x
=20
x
=20
x
=20
N/A
=20
x
=20
N/A
=20
Conditions you have to meet when a withdrawal is made
=20
Neither you nor your spouse or common-law partner can =
own the qualifying home more than 30 days before a withdrawal is made.
=20
x
=20
x
=20
x
=20
N/A
=20
N/A
=20
x
=20
You have to be a resident of Canada.
x
x
x
N/A
x
N/A
=20
You have to complete Form T1036.
x
x
x
N/A
x
N/A
=20
You have to receive all withdrawals in the same year.
x
x
x
N/A
x
N/A
=20
You cannot withdraw more than $20,000.
x
x
x
N/A
x
N/A
=20
Condition you have to meet after all your withdrawals =
have been made
=20
You have to buy or build the qualifying home before=20
October 1 of the year after the year of withdrawal.
=20
x
=20
x
=20
x
=20
N/A
=20
N/A
=20
x
=20
=20
You have to enter into a written agreement to buy or build a =
qualifying home
To withdraw funds from your RRSPs under the HBP, you must first =
have entered into a written agreement to buy or build a qualifying home. =
Obtaining a preapproved mortgage does not satisfy this condition.
Note
If you are withdrawing funds from your RRSPs to help a related =
disabled person to buy or build a qualifying home, that person must meet =
this condition.
When you withdraw funds from your RRSPs under the HBP, you have to =
intend to occupy the qualifying home as your principal place of =
residence no later than one year after buying or building it. Once you =
occupy the home, there is no minimum period of time that you have to =
live there.
In some cases, you may not occupy the qualifying home by the end =
of the 12-month period after you bought or built it. If this happens to =
you, we still consider you a participant in the HBP because you intended =
to occupy the home as your principal place of residence no later than =
one year after buying or building it.
Note
If you are withdrawing funds from your RRSPs to buy or build a =
qualifying home for a related disabled person or to help a related =
disabled person to buy or build a qualifying home, that person must meet =
this condition.
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.
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 withdrawal and ending 31 days before your withdrawal, you or your =
spouse or common-law partner owned a home that you occupied as your =
principal place of residence.
Example 1
You want to participate in the HBP in 2002. To be considered a =
first-time home buyer, you or your spouse or common-law partner cannot =
have owned and occupied a home as your principal place of residence at =
any time during the period beginning January 1, 1998, and ending 31 days =
before your withdrawal in 2002.
In this section, the word "home" has the same meaning as the term =
"qualifying home".
Note
You must meet the first-time home buyer's condition at the time =
you withdraw an amount from your RRSPs under the HBP. If you are not =
considered a first-time home buyer when you withdraw an amount, that =
amount will have to be included in your income.
To determine if you are considered a first-time home buyer, =
complete the following questionnaire:
Are you considered a first-time home buyer?
Question 1 - Did you, at any time during the period =
beginning January 1 of the fourth year before the year of withdrawal and =
ending 31 days before the withdrawal, own a home that you occupied as =
your principal place of residence?
Yes
[__] You are not considered a first-time home buyer.
=20
No
[__] Go to question 2.
=20
Question 2 - Do you have a spouse or common-law partner?
Yes
[__] Go to question 3.
=20
No
[__] You are considered a first-time home buyer.
=20
Question 3 - Did your spouse or common-law partner have an =
owner-occupied home, at any time during the period beginning January 1 =
of the fourth year before the year of withdrawal and ending 31 days =
before the withdrawal, that you occupied with that individual while you =
were living together as spouses or common-law partners?
Yes
[__] You are not considered a first-time home buyer.
=20
No
[__] You are considered a first-time home buyer.
=20
If you cannot participate in the HBP in a year because you =
do not meet this condition, see the section called "If you cannot =
participate in the year, can you participate in a later year?".
=20
If at the time of 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.
Exception to the first-time home buyer's condition -You do not =
have to meet the first-time home buyer condition to participate in the =
HBP if any of the following situations applies to you:
a.. you are a disabled person and you withdraw funds from your =
RRSPs under the HBP to acquire a home that is more accessible, or better =
suited to your needs;=20
b.. you withdraw funds from your RRSPs under the HBP to acquire =
a home for a disabled person related to you by blood, marriage, or =
adoption, that is more accessible to, or better suited to the needs of, =
that person; or=20
c.. you withdraw funds from your RRSPs under the HBP and give =
those funds to a disabled person related to you by blood, marriage, or =
adoption, to acquire a home that is more accessible to, or better suited =
to the needs of, that person.
Your HBP balance on January 1 of the year of withdrawal has to be =
zero
If you previously participated in the HBP, you may be able to do =
so again if:
a.. your HBP balance is zero on January 1 of the year during =
which you plan on making another HBP withdrawal; and=20
b.. you meet all the other HBP conditions that apply to your =
situation.
Your HBP balance is zero when the total of your designated HBP =
repayments and the amounts included in your income (because they were =
not repaid to your RRSPs) in previous years equals the total eligible =
withdrawals you received.
Neither you nor your spouse or common-law partner can own the =
qualifying home more than 30 days before the withdrawal
You cannot withdraw an amount from your RRSP under the HBP if you =
or your spouse or common-law partner owned the home described on Form =
T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP, =
more than 30 days before the date of your withdrawal.
Example 2
Kate buys a qualifying home with a closing date (acquisition date) =
of November 1, 2001. She must make her final withdrawal under the HBP no =
later than 30 days after the closing date. Therefore, Kate has until =
December 1, 2001, to make her last withdrawal under the HBP. If she =
makes a withdrawal after December 1, 2001, it will not be considered an =
eligible withdrawal and must be included in her income for the year =
2001.
Note
If you are withdrawing funds from your RRSPs to help a related =
disabled person to buy or build a qualifying home, the disabled person =
and his or her spouse or common-law partner (if applicable) must meet =
this condition.
=20
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Answers to this and other similar questions can be obtained free on Air =
every Sunday morning.
Starting this Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of =
Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show =
called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the =
internet at
www.600AM.com=20
David Ingram's US/Canada Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321=20
[email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed =
information or consultation and is to be regarded only as general =
comment. Nothing in this message is or should be construed as advice =
in any particular circumstances. No contract exists between the reader & =
the author and any and all non-contractual duties are expressly denied. =
All readers should obtain formal advice from a competent financial, or =
real estate planner or advisor & appropriately qualified legal =
practitioner, tax or immigration specialist in connection with personal =
or business affairs such as at www.centa.com. If you forward this =
message, this disclaimer must be included."
. =20
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