First Time Home Buyers: how you can harness the power of your RRSPs
RRSP (Registered Retirement Savings Plan) season is here!
Use the first 60 days of the year to contribute to your RRSP. You have until March 1st, 2017 to reduce your 2016 income and get a higher tax refund.
Additionally, you can withdraw tax-free funds from your RRSP for qualifying home purchases.
The Home Buyers’ Plan (HBP) is a program that allows Canadians to withdraw up to $25,000 in a calendar year from their RRSPs to buy or build a qualifying home for themselves or for a related person with a disability.
Under this plan, only first-time home buyers are eligible to participate, unless the special rules for persons with disabilities apply.
Each spouse or common-law partner can withdraw eligible amounts under the HBP from any RRSP under which he or she is the annuitant. Each person can withdraw up to the $25,000 limit, or $50,000 if purchasing the property jointly.
Any RRSP contributions made must remain in the RRSP for at least 90 days before they can be withdrawn under the HBP.
You have up to 15 years to repay to your RRSP from the second year following the year of withdrawal. If the required repayment is not made, the owing amount will have to be included as income in the year of the shortfall.
Each year Canada Revenue Agency (CRA) will send you a Home Buyers’ Plan statement of account with your notice of assessment or notice of reassessment, so you can keep track of your RRSP repayments.
This is an excellent opportunity to save for your first down payment. Make sure you make use of it!