The home buyer plan is a great way to afford your first home. Saving money in your RRSP fund then being able to withdrawal the funds to buy your first home is a very satisfying feeling. However when it comes to the home buyer plan repayment, this can be confusing when it comes to taxes. In this article we will touch base on the information you need when using your home buyer plan.
What is the Home Buyer Plan?
The homebuyer plan is a great program designed to help people save money when it comes to buying their first home. Essentially you are saving your money and putting this into your RRSP, then you are withdrawing these funds to buy your home. To qualify, there are a few conditions that you must meet:
- The withdrawal from RRSP can only be for your first home purchase
- Plan to designate your home as your primary residence
- Be a Canadian Resident
- You must make all your RRSP withdrawals in the same calendar year
The maximum that you can take out from your RRSP for your first home is $25,000. When you are withdrawing your RRSP from the bank, make sure that you let them know it is for your first time buying a home. We have seen some slips come back that were not recorded properly and were taxed.
Note: that you are not being taxed when withdrawing this money
Home Buyer Plan Repayment
After you have withdrawn the RRSP for your first home, it is now time to start to think about the home buyer plan repayment. The repayment of the home buyer plan does not start until 2 years after your withdrawal. So you will file your taxes once, and then one more time and that is when you will see your home buyer plan repayment amount on your notice of assessment. The amount will be listed under the RRSP section of the assessment.
As you see on your notice of assessment, you have 15 years to pay back your home buyer plan. There is a minimum amount that must be paid back and must be paid before the next tax return. For more information see the CRA guide.
So how do we pay back the RRSP into the Home Buyer Plan?
Ok so this is the most asked question we receive. So if your minimum payment is $650, then what you do is make sure that your contribution to RRSP is $650 for the year. So you have to had at least put money into your RRSP of this amount. The dates for this can be Mar to Dec of that year. As well you have the same year you are filing taxes Jan and Feb of the new year.
This 12 month period you are able to make your payment back into RRSP.
Can I pay more than my minimum into the Home Buyer Plan?
Yes for sure you can. You are able to pay as much as you want into the plan per year. There is no maximum amount of paying back into your homebuyer plan per year.
What if I want to use some of my RRSP for repayment and the rest on my tax return?
According to the example above your repayment minimum is $650. However what if you paid $2000 into RRSP for the year? Well you have two choices.
One you can put the whole amount of $2000 as a repayment. Or two you can just designate only $650 into the repayment, and the rest you can have on your tax return to help you with a bigger return.
What if I forgot to pay into my RRSP for my Home Buyer Plan?
If you miss your RRSP payment towards the home buyer plan, then the CRA will put that amount as income on your tax return. Which will create a taxable owing for that additional income. This will show up on your notice of assessment after they process your return. Many people do forget and it is normal to designate that payment.
However don’t forget you have until the end of February on the same year to make a payment into RRSP. Don’t assume you missed it just because Dec 31 passes. January and February of the next months still count if you made a payment then.
Accufile is here to help
We hope that this article helped and shed some light on the home buyer plan and repayment back into the plan. Accufile is always here to help and we offer free consulting when it comes to any tax issues. We want our clients to be fully aware of all the rules and laws that taxes can bring to us individually. The more you know the more we can help. For a quick assessment of your refund see our free tax calculator.
As well take advantage of our online Tax Accountants. Personal Tax Returns for $25, Business Tax Returns for $75, and Corporate Tax Returns for $200.