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What you need to know about the Home Buyers' Plan

Canadian Living
Culture & Entertainment

What you need to know about the Home Buyers' Plan

Qualifying first-time home buyers can benefit from the HBP

With March 1 fast approaching, many Canadians, including myself, are thinking about making tax-saving RRSP contributions. I never contributed to an RRSP in previous years. But with plans to buy a house in the coming years, I've finally opened a plan. Here's why I'm investing in my future. The Home Buyers' Plan A Canada Revenue Agency program aimed at first-time homebuyers, the Home Buyers' Plan (HBP) allows Canadian residents to withdraw up to $25,000 from an RRSP fund to put toward buying or building a qualifying home. Unlike withdrawals made under other circumstances, funds taken out under the plan are 100 percent tax-free. The one catch? Those who take advantage of the HBP must repay those withdrawals over the course of 15 years, starting two years after your withdrawal. (Each year, you're expected to pay back one-fifteenth of the withdrawal.) If an annual payment is missed, that amount is deemed taxable income for the year. HBP conditions In order to qualify for the plan, applicants must meet the following criteria:
  • You must be a resident of Canada
  • You must be the RRSP owner, and the plan cannot be locked (check with your issuer)
  • You must be a first-time homebuyer
  • You need to have entered into a written agreement to buy or build a home
  • You can't own the home for more than 90 days before withdrawing the funds
  • The home must be your principal domicile, or it can be the residence of a disabled relative (should that person meet the conditions)
  The benefits of tax-deferment Firstly, RRSPs allow you to reduce your yearly taxable income by the amount that you contribute to your plan. While that money will eventually be taxed upon non-HBP withdrawals, those additional dollars can be put away for the down payment on your first home, almost like an advance. That also means your extra savings will earn interest, dividends or capital gains for the time that it's invested, putting more money in your pocket, sooner. Ready to get started? Visit the Canada Revenue Agency for more information on the HBP, or learn more about RRSPs here. (Photo courtesy StockMonkeys.com)
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What you need to know about the Home Buyers' Plan

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