The Home Buyers’ Plan and the CRA
The Home Buyers’ Plan (“HBP”) is a program that allows qualified first-time home buyers (the definition for which can be found below) to withdraw up to $35,000 from their RRSP on a tax-free basis, to buy or build a qualifying home for themselves or a related person with a disability.
Under the HBP program, an individual can pay back the withdrawn funds over 15 years. The program is great for those looking to use the funds towards a down payment on a home. However, there are strict conditions to meet to be eligible for the HBP program. If all of the conditions are not met, taxpayers risk having the amount of money withdrawn added to their income for the year.
The withdrawal can be made in a single amount or a series of withdrawals in the same calendar year. Only the person who is entitled to receive payments from the RRSP can withdraw the funds from the account. Individuals are also allowed to withdraw funds from more than one RRSP as long as they are the owner of each one. The RRSP contributions must also have been in the RRSP for at least 90 days before they are withdrawn under the HBP program. In addition to these requirements, there are more conditions that must be met, which is discussed below.
First-time Home Buyer
To qualify for the HBP program, a taxpayer needs to meet the definition of “first-time home buyer”. This includes those who are purchasing a home for the first time in their life. However, individuals who have withdrawn money from their RRSP under the HBP, or otherwise, can still be considered a first-time home buyer for the program, if all the following conditions are met:
- An individual is a first-time home buyer if, within four years, they did not occupy a home that they, or their current spouse or common-law partner owned. If the individual’s spouse or common-law partner owned a home previously, they can still be considered a first-time home buyer but some additional conditions need to be met; and
- The four-year period begins on January 1st of the fourth year before they withdraw the funds.
Additional Requirements for the Home Buyers’ Plan
According to the CRA’s publication How to participate in the Home Buyers’ Plan (HBP), the following conditions are required for eligibility under the HBP program.
- The taxpayer must be considered a first-time home buyer;
- The taxpayer must have a written agreement to buy or build a qualifying home, either for themselves or for a related person with a disability; a qualifying home is a housing unit located in Canada. It includes single-unit dwelling homes, apartments, condominium units, mobile homes, townhouses, and semi-detached homes, among others.
- The taxpayer must be a resident of Canada, for tax purposes, when they withdraw funds from their RRSP under the HBP and up to the time a qualifying home is bought or built; for more information on tax residency, see the
- The taxpayer must intend to occupy the qualifying home as their principal place of residence within one year after buying or building it. If they buy or build a qualifying home for a person with a disability or help a related person with a disability buy or build a qualifying home, they must intend that the related person with a disability occupies the qualifying home as their principal place of residence; and
- In all cases, if the taxpayer had previously participated in the HBP, they may be allowed to do so again if their repayable HBP balance on January 1st of the year the withdrawal is zero and they meet all other HBP eligibility conditions.
CRA’s How to participate in the Home Buyers’ Plan (HBP), also further outlines the following conditions for the RRSP withdrawal to be eligible under the program:
- Neither the taxpayer nor the spouse or common-law partner or the related person with a disability can own the qualifying home for more than 30 days before the withdrawal is made;
- Normally, the taxpayer will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP;
- The taxpayer has to buy or build a qualifying home for themselves, or a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1st of the year after the year of the withdrawal; and
- The taxpayer must fill out Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP, for each eligible withdrawal.
If you are interested in participating in the HBP or have had your withdrawal under the program denied, our team of experts can help! Contact us today to make an appointment to speak with one of our experienced tax lawyers.
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.