It is well known that when you are a First Time Home Buyer you can use up to $25,000 from your RRSP without paying any personal taxes. However, you will have to repay any amount withdrawn from your RRSP for down payment of a home purchase.

Who is a First Time Home Buyer?

Normally, you have to be a first-home buyer to withdraw funds from your RRSPs to buy or build a qualifying home.

You are considered a first-time home buyer if, in the four year period, you did not live in a home that you or your current spouse or common-law partner owned. This condition is particularly important because even if the house where you live is not in your name but your spouse or common law partner, you don’t qualify for this benefit.

Even if you or your spouse or common-law partner has previously owned a home, you may still be considered a first-time home buyer.

The four-year period:

Begins on January 1 of the fourth year before the year you withdraw funds; and

Ends 31 days before the date you withdraw the funds.

Example:

If you withdraw funds on March 31, 2016, the four-year period begins on January 1, 2012 and ends on February 28, 2016.

If you have a spouse or common-law partner, it is possible that only one of you is a first-time home buyer.

RRSP withdrawal conditions

* You have to be a resident of Canada at the time of the withdrawal.

* You have to receive or be considered to have received, all withdrawals in the same calendar year.

* You cannot withdraw more than $25,000.

* Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdraw amounts of $25,000 or less.

* Normally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.

* Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.

When do you I have to repay the amount withdrawn?

Generally, you have up to 15 years to repay to your RRSP(s) the amount you withdrew from them for you down payment. However, you can repay the full amount into your RRSP at any time.

Example:

If you withdrew $15,000 from your RRSPs for the down payment of your house you will have to repay to your RRSPs $1,000 per year for the next 15 years.

For more information please contact Peter Puzzo at peter@mrmortgage.ca  or visit www.cra-arg.gc.ca.