Part One - Participating in the HBP

What is the HBP?

The HBP is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home.

The home can be for you, or it can be for a related person with a disability. If the home is acquired by a person with a disability or for a related person with a disability, one of the following should apply:

• it is more accessible to that person than his or her current home; or
• it is better suited to that person's needs.

As an HBP participant, you can acquire the home for the related person with a disability, or you can provide the withdrawn funds to the related person with a disability to acquire the home.

You do not have to include eligible withdrawals in your income, and your RRSP issuer will not withhold tax on these amounts. You can withdraw a single amount or make a series of withdrawals throughout the same calendar year, provided the total of your withdrawals is not more than $25,000. If you buy the qualifying home with your spouse or common-law partner, or with other individuals, each of you can withdraw up to $25,000.

Note
Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP.

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

Can a withdrawal be made from any RRSP?

You (the participant) can only withdraw funds from an RRSP under which you are the annuitant. In the case of spousal or common-law partner RRSPs, the annuitant is the person who will receive benefits from the plan.

What are the conditions for participating in the HBP?

A number of conditions have to be met in order to participate in the HBP. While some conditions have to be met before you can withdraw funds from your RRSPs, others apply when or after you receive the funds.

Generally, if you participate in the HBP, you have to meet all the HBP conditions yourself. However, depending on your situation, some conditions may apply to another person. For example, if you withdraw funds from your RRSPs to buy or build a qualifying home for a related person with a disability, or to help a related person with a disability buy or build a qualifying home, some conditions have to be met by that person. Regardless of the situation, you are responsible for making sure that all applicable HBP conditions are met. If at any time during your participation period a condition is not met, your withdrawal will not be considered an eligible withdrawal and it will have to be included in income for the year it is received. The following chart lists all the HBP conditions, and who has to meet them in different situations. We explain each condition in the following chart.

Conditions for participating in the HBP

Situation 1 - You buy or build a qualifying home for yourself.

Situation 2 - You, a person with a disability, buy or build a qualifying home for yourself.

Situation 3 - You buy or build a qualifying home for a related person with a disability.

Situation 4 - You help a related person with a disability buy or build a qualifying home.

You have to enter into a written agreement to buy or build a qualifying home

To withdraw funds from your RRSPs under the HBP, when you are buying or building a qualifying home for yourself or a related person with a disability, you must first have entered into a written agreement to buy or build a qualifying home. Obtaining a pre-approved mortgage does not satisfy this condition.

Note
If you are withdrawing funds from your RRSPs to help a related person with a disability who is buying or building a qualifying home, it is the related person with a disability who must have entered into such an agreement.

You have to intend to occupy the qualifying home as your principal place of residence

When you withdraw funds under the HBP, you have to intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. Once you occupy the home, there is no minimum period of time in which you have to live there.

In some cases, you may not occupy the qualifying home by the end of the 12-month period after you bought or built it. If this happens to you, we still consider you a participant in the HBP because you intended to occupy the home as your principal place of residence no later than one year after buying or building it.

Note
If you are withdrawing funds from your RRSPs to buy or build a qualifying home for a related person with a disability or to help a related person with a disability buy or build a qualifying home, you must intend that the related person with a disability will meet this condition.

You have to be considered a first-time home buyer

Generally, before you can withdraw funds from your RRSPs to buy or build a qualifying home, you have to meet the first-time home buyer's condition. If you are a person with a disability, or you are acquiring a home for a related person with a disability or helping such a person acquire a home, you may not have to meet this condition.

You are not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence.

If at the time of the withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer (see example 1).

Example 1
In 2004, Paul sold the home he had occupied as his principal place of residence for five years. He then moved into a rented apartment. In 2004, he met Jane and she moved in with him. Jane had been renting her own apartment, and had never owned a home.

Jane and Paul were married in August 2007. They wanted to withdraw funds from their RRSPs to participate in the HBP in September 2007. Since Paul owned and occupied his home during the period beginning January 1 of the fourth year before the year he wants to make the withdrawal, he is not considered a first-time home buyer, so he cannot participate in the HBP in 2007. Paul will be able to participate in the HBP in 2009, as he will not have owned a home that he occupied as his principal place of residence since January 1, 2005.

However, Jane is considered a first-time home buyer, since she never owned a home, and she did not live with Paul during the period in which he owned and occupied his home as his principal place of residence. She can participate in the HBP in 2007, providing all the other requirements are met.

If Jane does not participate in the HBP in either 2007 or 2008, Paul can participate in the HBP in 2009. If they want to participate together in the HBP, they both have to wait until 2009 at which time they can withdraw funds under the HBP to buy or build a qualifying home.

To determine if you are considered a first-time home buyer, complete the following questionnaire:

Are you considered a first-time home buyer?

Question 1 - Did you, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, own a home that you occupied as your principal place of residence?

Question 2 - Do you have a spouse or common-law partner?

Question 3 - Did your spouse or common-law partner have an owner-occupied home, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, that you occupied with that individual while you were living together as spouses or common-law partners?

Neither you nor your spouse or common-law partner can own the qualifying home more than 30 days before the withdrawal

You cannot withdraw an amount from your RRSP under the HBP if you or your spouse or common-law partner owned the home described on Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP, more than 30 days before the date of your withdrawal.

Example 2
Kate buys a qualifying home with a closing date (acquisition date) of November 1, 2007. She must make her final withdrawal under the HBP no later than 30 days after the closing date. Therefore, Kate has until December 1, 2007, to make her last withdrawal under the HBP. If she makes a withdrawal after December 1, 2007, it will not be considered an eligible withdrawal and will have to be included in her income for the year it is received.

Note
If you are withdrawing funds from your RRSPs to help a related person with a disability to buy or build a qualifying home, the person with a disability and his or her spouse or common-law partner (if applicable) must meet this condition.

You have to be a resident of Canada

You have to be a resident of Canada when you receive funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built.

You have to receive all withdrawals in the same calendar year

To participate in the HBP, you have to receive all the withdrawals from your RRSPs in the same calendar year. However, if you receive a withdrawal in one year and another in January of the following year, we consider the January withdrawal to have been received in the year the first withdrawal was made.

Note
If the January withdrawal is received before you acquire your qualifying home, or no later than 30 days after you acquire it, and all the other relevant conditions described in the chart are met, it is an eligible withdrawal. For this purpose, your HBP balance on January 1 is not a relevant condition and does not have to be zero.

Example 3
On October 15, 2006, Chloe withdrew $7,500 from her RRSP under the HBP. Before the withdrawal, Chloe had entered into a written agreement to buy a qualifying home. In January 2007, she withdrew an additional $1,500 to pay expenses she had not anticipated. Chloe acquired the qualifying home in March 2007. The January withdrawal is an eligible HBP withdrawal because Chloe received it before she acquired her qualifying home. She does not have to include it in her income for 2007.

You cannot withdraw more than $25,000

You can make more than one withdrawal, as long as the total of your withdrawals is not more than $25,000. If you buy the qualifying home with your spouse or common-law partner, or with other individuals, each of you can withdraw up to $25,000.

Note
If the total of your RRSP withdrawals under the HBP is more than $25,000, you will have to include the excess amount in your income for the year you received it. In addition, your RRSP issuer will have to withhold tax on the excess amount at the time of the withdrawal.

You have to buy or build the qualifying home before October 1 of the year after the year of the withdrawal

Generally, if you participate in the HBP in a particular year, you have to buy or build the qualifying home before October 1 of the year following the year of the withdrawal.

We consider you to have bought or built a qualifying home if you bought or built it alone or with one or more individuals. If you are building a qualifying home, we consider you to have built the home on the date it becomes habitable.

Note
If you are withdrawing funds from your RRSPs to help a related person with a disability to buy or build a qualifying home, the person with a disability must meet this condition.

How to make an HBP withdrawal

To make an eligible withdrawal under the HBP, you have to use Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP.

You have to complete Form T1036 for each withdrawal you make.

You have to file an income tax return

Starting in the year you make your first HBP withdrawal, you have to complete and send us a return every year until you have repaid all of your HBP withdrawals or included them in your income. You have to send us a return even if you do not owe any tax. Attach the T4RSP slips that your RRSP issuer sends you for your HBP withdrawals.

Part Two - Repaying your withdrawals

Over a period of no more than 15 years, you have to repay to your RRSPs the amounts you withdrew under the HBP. Generally, for each year of your repayment period, you have to repay 1/15 of the total amount you withdrew, until the full amount is repaid to your RRSPs. Your repayment period starts the second year following the year you made your withdrawals.

You will receive a Home Buyers' Plan (HBP) Statement of Account each year with your Notice of Assessment or Notice of Reassessment. This statement will show the total HBP withdrawals, the amounts you have repaid to date, your HBP balance, and the amount you have to contribute to your RRSP and designate as a repayment for the following year.

How to make your repayment

To make a repayment under the HBP, you have to make contributions to your RRSPs in the year the repayment is due or in the first 60 days of the following year. You can contribute the repayments to any of your RRSPs. Once your contribution is made, you can designate all or part of the contribution as a repayment under the HBP.

Note
If your RRSP deduction limit for the repayment year is zero, you can still contribute to your RRSPs and designate the amount you contributed as a repayment under the HBP. We do not consider an amount you designate as a repayment under the HBP to be an RRSP contribution. Therefore, you cannot claim a deduction for this amount on your return.

Example 6
In 2005, Robert withdrew $6,000 from his RRSPs to participate in the HBP. Robert's repayment for 2007 is $400 ($6,000 ÷ 15).

In 2007, Robert contributes $8,200 to his RRSPs. Robert could deduct the full amount as an RRSP contribution on line 208 of his 2007 return because his Notice of Assessment for 2006, shows that he has an RRSP deduction limit of $11,000 for 2007. However, he knows an HBP repayment is required.

Therefore, Robert files Schedule 7 with his 2007 return and records his $8,200 RRSP contribution on line 245. He designates $400 of this amount as an HBP repayment on line 246 of Schedule 7. Robert deducts the remaining $7,800 as an RRSP contribution on line 208 of his 2007 return.

What happens if I choose to begin my repayments earlier?

In such case, your repayment period will remain the same. Any repayments made before you are required to start your repayments will reduce the amount you have to repay for the first year. If your early repayments are more than this required amount for the first year, the difference will reduce your HBP balance and your remaining repayment amounts over the entire repayment period.

What happens if I repay more than the amount I have to repay for the year?

If your designated HBP repayment is more than the amount you are required to repay for the year, the HBP balance for later years will be reduced. You will still have to make the required payment for the following year.

The annual Home Buyers' Plan (HBP) Statement of Account that we send you with your Notice of Assessment or Notice of Reassessment takes into account any additional payments you made, and will give you the minimum amount you have to repay for the next year. If you want to calculate the minimum amount you have to repay for the next year, divide your HBP balance by the number of years remaining in your repayment period.

Example 7
In 2001, Suzanne withdrew $16,500 from her RRSPs to participate in the HBP. Her repayment for 2003 was $1,100 ($16,500 ÷ 15). Suzanne made the repayment for 2003, 2004 and 2005. In 2006, Suzanne receives an inheritance and decided to contribute $8,000 to her RRSPs and designate that amount as a repayment under the HBP for 2006. She calculates the amount she has to repay for the year 2007, using the chart below.

What happens if I repay less than the amount I have to repay for the year?

If your designated HBP repayment is less than the amount you are required to repay for the year, you have to include the difference as RRSP income on line 129 of your return. You cannot include more than the required repayment for the year minus the amount you repay and designate as an HBP repayment. You cannot include in income an amount that is more than the result of this calculation.

What happens if I do not repay the amount I have to repay for the year?

If you do not repay the amount you have to repay for the year, you have to include it as income on line 129 of your return. The amount you include on line 129 is the minimum amount you have to repay as shown on your Home Buyers' Plan (HBP) Statement of Account. Your HBP balance will be reduced accordingly.