RRSP Home Buyer Plan.
RRSP withdrawals don’t have to be shown in your income statement and your RRSP provider will not withhold tax on these payments. However, before you can pull out funds you must have entered into a written agreement to purchase or build a home which you must inhabit no later than one year after purchasing or constructing the home.
If you purchase the home or condos together with your wife or partner or any other individual, each of you can withdraw up to $25,000. You cannot with draw an amount from your RRSP under the Home Buyer Plan if you or your wife owned the home more than 30 days before the date of your withdrawal.
- Up to $25,000 per individual could be pulled tax-free from RRSP to purchase or build a principal residence. Partners including common-law will be able to take out up to $50,000.
- You have to meet the first time home buyer’s conditions. You are not considered a first time home buyer if you or your wife owned a home that you occupied as your principal residence in the preceding 5 years. To determine past 5 years, the 4 years preceding the year you make your withdrawal plus the period in the year you make your withdrawal ending 31 days before your withdrawal is the rule adopted.
- Home buyers withdrawals do not have to pay income tax on the amount taken out, as long as the funds are paid back into an RRSP in the future.
- The Fifteen year repayment period will begin in the 2nd year following the year in which the withdrawal is made. In addition, a home must generally be possessed before October 1st of the calendar year following the year of withdrawal. e.g , those making withdrawals under the plan in 2009 will have until October 1st, 2010 to acquire a qualifying home and their first annual repayment will be due by the end of 2011 or the first two months of 2012.
- A special rule declines a tax reduction for contributions to an RRSP that are withdrawn within 90 days of the RRSP deposit being made. Consequently, to get the normal tax break for a contribution and to use those funds under the plan, the money must be in your RRSP for at least 90 days before a withdrawal is made.
Existing homeowners can utilize the Home Buyer Plan to buy a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:
- Qualifies for the disability tax credit (DTC) and is purchasing a home that is more accessible for the individual or is better suitable for the proper care of that person is related to a disabled individual who qualifies for the DTC and is
- buying a home for the advantage of the disabled person that is more accessible for, or better suited for, the care of the disabled individual, or;
- is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.
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