The withdrawal must be repaid in equal installments over 15 years to the
extent that a minimum repayment for a year is not made, the shortfall is
taxed in your income. The 15-year repayment period commences in the second
calendar year following the calendar year of the RRSP withdrawal. Payments
made in the first 60 days of a year count as repayments for preceding year.
For example, if you make a withdrawal in 2018, you must commence making
RRSP repayments under the Home Buyers’ Plan by March 1, 2021.
There’s no specific restriction on “doubling up” on the withdrawal, e.g.,
where a home is held in co-tenancy. For example, a husband and wife may
together withdraw up to $50,000 (i.e., up to $25,000 from each spouse’s
You’re generally eligible for the plan provided that you meet the
* You’ve never participated in the program before.
* You’ve signed an agreement to build or purchase a qualifying home.
* The home (or a replacement property) is bought or built by October 1 of
the year following the year in which you’ve received the funds from the
RRSP (extensions are available in some instances).
* You intend to occupy the home as your principal place of residence
within one year of buying or building the home.
A “look-back” rule blocks the HBP if you or your spouse (including a
“common law” spouse) have owned an owner-occupied home for a period of four
years or so.
Is an HBP withdrawal a good idea?
The big problem with the Home Buyers’ Plan is that you could be caught in a
cash-flow crunch that could lead to tax penalties down the road.
First, the cash-flow drain due to repayments to the plan may impinge on
your ability to make your regular tax-deductible RRSP contributions in the
future. So without that annual RRSP contribution writeoff, your tax bill
could go up. Worse still, if the required Home Buyers’ Plan repayment,
which is not deductible, is not made on a timely basis, then you’ll suffer
a further taxable benefit. Even harsher rules may apply if you pass away or
cease to be a Canadian resident. (Note: Restrictions apply to deductions
for ordinary RRSP contributions if made less than 90 days before the
If you or your spouse are about to drop into a low tax bracket (e.g., you
have plans to retire from the workforce), the Home Buyers’ Plan may make
more sense. For example, the taxable benefit resulting from nonrepayment
may result in little or no adverse tax consequences under these
Having said this, participating in a Home Buyers’ plan is usually a better
bet than an outright withdrawal from your plan, which is a straight add-on
to your taxable income in the year of withdrawal. The only problem is
whether $25,000 would be enough to achieve anything in this real estate
Samantha Prasad, LL.B., is a Partner with Toronto law firm Minden Gross LLP, a
Meritas Law Firm Worldwide affiliate, and specializes in corporate,
estate, and international tax planning. She writes frequently on tax
issues, and is the co-author of
Tax and Family Business Succession Planning, 3rd Edition . She is also
co-editor of various Wolters Kluwer Ltd. tax publications.
Portions of this article first appeared in The TaxLetter, © 2018 by MPL
Communications Ltd. Used
© 2018 by Fund Library. All rights reserved. Reproduction in whole or in
part by any means without prior written permission is prohibited.
The foregoing is for general information purposes only and is the opinion
of the writer. This information is not intended to provide specific
personalized advice including, without limitation, investment, financial,
legal, accounting or tax advice.