HBP repayment or RRSP

[sansglee]

I withdrew some money from RRSP under HBP back in 2015, Repayment doesn't start untill next tax year. I made some contributions to RRSP this year. Is it good to allocate some of the funds under HBP like an early payment or just leave it under RRSP ? Which is better ? Which will give us more benefit ? Thank you

[ee2k]

Umm if you took it out in 2015 repayment starts in 2016. Go to cra.gc.ca and check your account balance. It'll tell you what's due. Please verify. Mine was due the next year after I used it.

I have been paying minimum required HBP repayment and contributing rest to RRSP so I can take advantage of tax break which in turn increases my total net worth and tax refund.

[nzwasp]

I thought you had to pay atleast 1333 every year to it. I was wondering about it though say you had 10k could you allocate it all to the HBP and still have the tax advantage or does it get cancelled out.

[eblend]

Double check your statement of income, I paid mine early in error because I thought it was next year, but it was the year after. Doesn't hurt but still.

As for nzwasp question, it cancels out, if you put 10k to repayment, you don't get 10k worth of RRSP deduction.

[Disoblige]

Originally posted by ee2k
Umm if you took it out in 2015 repayment starts in 2016. Go to cra.gc.ca and check your account balance. It'll tell you what's due. Please verify. Mine was due the next year after I used it.

This is not how it works. It is the next TAX year, so for example if you took money out for HBP in 2015, you don't begin paying back until the 2016 tax year, which is in 2017.

I know this for a fact.

[FraserB]

Originally posted by nzwasp
I thought you had to pay atleast 1333 every year to it. I was wondering about it though say you had 10k could you allocate it all to the HBP and still have the tax advantage or does it get cancelled out.

I was told by my adviser that I could pay it off in any amount within the 15 years and there was no minimum per year. If you took the max out and want to pay it off over 15 installments, it would be $1,667 per year.

You don't receive the tax benefits from anything that is allocated to HBP repayment.

[rx7boi]

I was told that you have a grace period of 2 years before you have to start paying it back.

Your repayment period starts the second year after the year you withdrew funds from your RRSP(s) for the HBP.

and

Generally, you have up to 15 years to repay to your RRSP(s), PRPP or SPP the amounts you withdrew from your RRSP(s) under the HBP. However, you can repay the full amount into your RRSP(s), PRPP or SPP at any time.

I took my HBP out in 2014. I have to pay it for 2016 now that my 2 years is up

The website has alot more information, including if you don't repay anything that particular year.

http://www.cra-arc.gc.ca/hbp/

[ee2k]

Originally posted by Disoblige


This is not how it works. It is the next TAX year, so for example if you took money out for HBP in 2015, you don't begin paying back until the 2016 tax year, which is in 2017.

I know this for a fact.

Which means that you have to pay it back within 2016 or the first 60 days of 2017? Looking at my statement that's what it states.

[OTown]

You have to either repay the HBP, or contribute to new RRSPs. The reason being that new RRSP contributions will NOT be put onto HBP unless its specifically put in for that reason and forms are sent. Putting money back into the HBP should not affect your RRSP contribution limit though.

[ee2k]

Originally posted by rx7boi
I was told that you have a grace period of 2 years before you have to start paying it back.



and



I took my HBP out in 2014. I have to pay it for 2016 now that my 2 years is up

The website has alot more information, including if you don't repay anything that particular year.

http://www.cra-arc.gc.ca/hbp/

K cool. I guess I am ahead on my payments!

[sabad66]

I would say in general it's better to allocate as little as possible to the HBP payment (i.e. amount you borrowed / 15), and allocate the rest to a "real" RRSP contribution.

THat way you will fulfill your obligations to pay yourself back, and still get a benefit of contributing to your RRSP (resulting in a tax return).

[J-hop]

Originally posted by FraserB


I was told by my adviser that I could pay it off in any amount within the 15 years and there was no minimum per year. If you took the max out and want to pay it off over 15 installments, it would be $1,667 per year.

You don't receive the tax benefits from anything that is allocated to HBP repayment.

We were told minimum payment is amount withdrawn/15 per year. Example on CRA's site seems to suggest this as well.

[sabad66]

Originally posted by J-hop


We were told minimum payment is amount withdrawn/15 per year. Example on CRA's site seems to suggest this as well.

Correct - you have to do at least 1/15th in the year two years after you bought. I just logged in to my cra to confirm this... I bought in 2015 and my first payment isn't due until 2017 tax year (march 1 2017 - feb 28 2018)

[J-hop]

Originally posted by sabad66

Correct - you have to do at least 1/15th in the year two years after you bought. I just logged in to my cra to confirm this... I bought in 2015 and my first payment isn't due until 2017 tax year (march 1 2017 - feb 28 2018)

that is my understanding as well.

[riander5]

Damn then why did i just contribute 2k to mine. WHYYYYYY

Oh well future me will thank current me... unless current me makes poor investing decisions

[dezmarez]

Originally posted by riander5
Damn then why did i just contribute 2k to mine. WHYYYYYY

Oh well future me will thank current me... unless current me makes poor investing decisions

Have you filed your taxes yet or just contributed to your RRSP?
You can still choose how much of that $2,000 you want to go towards HBP Repayment if you haven't filed.

For example, if the minimum payment is $500, you can choose to elect $500 of your $2,000 has HBP and the remaining $1,500 as a regular contribution.

[realazy]

Just a bit more info on the minimum repayment amount. If you do not repay the minimum amount, that amount is counted as an RRSP withdrawal and counts as income for the year. It also means that you lost that contribution room.

If you pay more than the minimum, the remaining balance will then be divided among the years remaining and reduces your minimum payment for the next tax year.