How Exactly Do You Pay Off The Home Buyers' Plan?
Monday Nov 21st, 2022
The Home Buyers’ Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from their RRSP without having to pay taxes. Afterwards, buyers are expected to repay the funds that were withdrawn under this plan. However, they don’t have to start repaying until 2 years after they took out the funds and up to 15 years to repay the full amount.
First, find out what your account balance is and the amount owing by logging into your CRA account and selecting “Go to RRSP and TFSA details.” From there, you can view your HBP
repayment details, which includes how much you withdrew in total, how much you’ve repaid so far, how much you owe this year, and the total balance remaining.
To repay, simply make a contribution to your RRSP any time during the tax year. When it’s time to file your taxes, you must designate all or part of that contribution as a repayment under the HBP. It’s important to note that any repayments you make under your HBP cannot be claimed as a deduction on your income tax. The good news is these repayments are not affected by your RRSP deduction limit, meaning if your deduction limit is zero, you can still make repayments to your HBP without penalty.
You're allowed to repay more than the amount that’s required every year, but you would still have to pay the minimum amount required in the following years. If for some reason you are unable to make your payments or you paid less than what was required for the year, you would have to claim the unpaid amounts as RRSP income when you file your taxes. This could reduce your tax refund or increase your balance owing.
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*This information should not be relied on as legal advice,
financial advice, or a definitive statement of the law in any
jurisdiction. Please consult your own legal counsel or financial representative.