Home Buyers Plan (HBP)
There is a Canadian government program called the Home Buyers’ Plan (HBP) that allows first-time home buyers to withdraw funds from their RRSP to purchase or build a qualifying home. Prior to April 2024, under the HBP, you could withdraw up to $35,000 tax-free from your RRSP, and if you’re purchasing with a spouse or common-law partner who also qualifies, they can withdraw an additional $35,000 from their RRSP, allowing for a combined total of $70,000. As of April 16, 2024, the federal government has increased the HBP withdrawal limit from $35,000 to $60,000 per individual. This means that eligible first-time home buyers can now withdraw up to $60,000 from their RRSPs to purchase or build a qualifying home. For couples, this allows for a combined withdrawal of up to $120,000.
Key Features of the Home Buyers’ Plan:
- First-Time Home Buyer Requirement: Generally, you must be considered a first-time home buyer, meaning you haven’t owned a home that you occupied as your principal place of residence in the last four years.
- Repayment Terms: The amount withdrawn must be repaid to your RRSP over a 15-year period, starting the second year after the withdrawal. Each year, you’ll need to repay 1/15th of the withdrawn amount. If you miss a repayment, that year’s required amount will be added to your taxable income.
- Residency Requirement: You must intend to occupy the home as your principal place of residence within one year of purchase or construction.
- Existing HBP Balance: If you’ve previously participated in the HBP, any outstanding balance must be zero before you can withdraw again.
