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----- QUESTION:
Hi there,
I have some questions regarding the use of an RRSP to come up with a =
downpayment for your first home.
1. How much of a refund do you get back when you cash out your RRSP for =
a downpayment on your first home?
2. Is there a maximum amount you can cash out?
3. If you are buying the residence with a common law spouse, can you =
both cash out your RRSPs and receive the same benefits or can only one =
person of the couple do this?
4. How long do you have to pay yourself back this money and what is the =
penalty for not paying it back?
5. How long do you have to have had money in this RRSP before you can =
cash it out for a home?
6. Can I contribute to a RRSP while working in the US on a TN visa =
without adverse tax effects?
Thanks
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david ingram replies:
1. There is no refund when you withdraw to buy a first time house =
under the homebuyers plan. Under the homebuyer's plan, you do not =
"cash" it out, you borrow from the plan. If you were to cash in the =
plan, you would have to pay 25 to 44% tax of the amount you take out.
2. There is no maximum to the amount you can cash out and pay tax on. =
There is a maximum of $20,000 that you can borrow tax free or tax =
deferred from your plan.
3. You can both borrow up to $20,000 from your RRSP accounts to use =
to purchase the houose, pay legal fees, furniture, landscape the yard, =
etc. =20
4. The money has to be paid back to the RRSP over a 15 year period. =
In other words, ifyou took out an exact $15,000, you would have to put =
$1,000 a year back into the plan to avoid tax. If you did not pay the =
$1,000 back, you have to add it to you8r income and would have to pay =
from $240 to $440 tax on it. The $1,000 (or 1/15th of what you took =
out) would be added to the top of your other income and theoretically =
would be taxed at your highest marginal tax rate.
5. It should be in for 90 days or more.
6. Yes but you likely should not. 19 out of 20 TN holders should =
"not" be paying any Canadian Income tax and therefore an RRSP =
contirbution would not be deductible against anything and would be =
taxable when you take it out.
Read the Home Buyers Plan booklet at:
http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.pdf
BEFORE you proceed and make sure that whoever you talk to understands =
what you are doing.
For instance, if your common-law spouse owned a house in the last four =
years but before you were living together, you can participate but she =
cannot. And, if she had a share in a house with an ex husband and it =
was not sold until after the two of you were living together, than =
neither of you can participate. Sounds like you need an individual =
consultation with the both of you (in person or by phone). I say this =
in particular because of the TN visa amd US tax return complication.
Answers to this and other similar questions can be obtained free on Air =
every Sunday morning.
Every 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
Local phone calls to (604) 280-0600 - Long distance calls to =
1-866-778-0600.=20
Old shows are archived at the site.
Fred Snyder and I are giving free seminars on making your CANADIAN =
mortgage interest tax deductible at our new office at=20
1764 West 7th
Vancouver.
This is in the Spence Diamond Building at the corner of 7th and Burrard
and is very easy to find.
When: Just about " Every" Thursday Night
Time: 7 to 9 PM
RSVP: phone (604) 731-8900 to reserve (limited to 15 people)
My time is still spent at=20
108-100 Park Royal South
West Vancouver, BC
(604) 980-0321
david ingram
This from ask an income tax immigration planning and bankruptcy expert =
consultant guru or preparer from www.centa.com or www.jurock.com or =
www.featureweb.com. Canadian David Ingram deals daily with tax returns =
dealing with expatriate:
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US, UK, GB, American and Canadian and Mexican and any of the 43 states =
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income tax wizard wizzard guru advisor advisors experts specialist =
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Pennsylvania, Rhode Island, Rockwall,=20
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wizard - 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 =
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