Home Buyers Plan -- RRSP

[vkesava1]

Hi there,

I have a question for you regarding the home buyers plan that allows you to take money out of RRSP.

I am currently building a home which will be ready to take possession June 2015.

I am thinking of opening a RRSP account now and will i be able to withdraw funds from the RRSP via home buyers plan if needed during the time of possession ?

I checked the CRA website, its bit confusing it says "

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

i have signed up the purchase agreement for building the home, what do they mean by " own " ? is that possession ? please help. Thanks

[BrknFngrs]

Have you taken a look at the detailed guide on CRAs site?

http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-13e.pdf

It addresses build timing in pretty good detail

[16hypen3sp]

Can't withdraw contributions made within 90 days of withdraw date. So if withdraw date is in June... you got Jan, Feb, March.

[eblend]

I did just that, opened RRSP and dumped money into it, only to take it out 3 month later, and got a big fat tax return as well. My situation was different thought, I was looking for a house at that time still, and wasn't building, buy buying used.

I will just throw it in here, just an FYI in case you didn't know:

1. Don't have to use it for anything house related if you don't want to, you basically get the cash and do what you please with it, buy furniture for the house, new car if you want, whatever.

2. Don't have to start paying back until like 2 years later. Your notice of assessment will include everything you need to know about the program and how much and when you have to start paying back.

[vkesava1]

Originally posted by BrknFngrs
Have you taken a look at the detailed guide on CRAs site?

http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-13e.pdf

It addresses build timing in pretty good detail

Could you please let me know in which page you are seeing more detail about the build? Not sure what i am missing on that doc. Thanks again

[navdeep]

Me and my wife doing the same thing


Question how much do you guys think I can get in a tax return if I put on $25000

[Darkane]

Originally posted by navdeep
Me and my wife doing the same thing


Question how much do you guys think I can get in a tax return if I put on $25000

Depends how much you make, but probably 1/3 of that or so.

[BrknFngrs]

Originally posted by eblend
I will just throw it in here, just an FYI in case you didn't know:

1. Don't have to use it for anything house related if you don't want to, you basically get the cash and do what you please with it, buy furniture for the house, new car if you want, whatever.

What are you basing this on? Just the fact that CRA would be unlikely to review how you spent the funds?

Conditions for participating in the program are pretty strict and it would be pretty brutal for them to determine that you failed to meet these conditions after a withdrawal (ie: your withdrawal would be fully taxable in the year it was taken out)

Originally posted by vkesava1
Could you please let me know in which page you are seeing more detail about the build? Not sure what i am missing on that doc. Thanks again

Take a look at Page 9; "If you are building a qualifying home, we consider you to have built the home on the date it becomes habitable"

Originally posted by navdeep
Question how much do you guys think I can get in a tax return if I put on $25000

It's pretty much your tax rate x $25,000; keeping in mind that based on your income level this could move you down a tax bracket.

[navdeep]

Originally posted by BrknFngrs

It's pretty much your tax rate x $25,000; keeping in mind that based on your income level this could move you down a tax bracket.

I made $55000

[16hypen3sp]

It's interesting the way certain people look at the use of this program. I used it and didn't mind it. Half of my family thought I was dumb for using it, others seen it as useful.

But of all the opinions I have heard about it, one really stands out.

I was at the bank one day, standing in line for a teller. There was a man and woman right in front of me. During our wait, an ad for this program pops up on the big monitors mounted overhead. The guy sees this and starts voicing his opinion on the matter to the woman.

"Why would anyone ever do that? You be the biggest fucking fool on the planet! Why would you convert your rrsp into a debt like that? Can you imagine?"

Kind of funny for me as I had already withdrew some of mine to use.

[dezmarez]

Originally posted by vkesava1
Hi there,

I have a question for you regarding the home buyers plan that allows you to take money out of RRSP.

I am currently building a home which will be ready to take possession June 2015.

I am thinking of opening a RRSP account now and will i be able to withdraw funds from the RRSP via home buyers plan if needed during the time of possession ?

I checked the CRA website, its bit confusing it says "

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

i have signed up the purchase agreement for building the home, what do they mean by " own " ? is that possession ? please help. Thanks

Basically they are saying you need to take the HBP out before you have occupied the home for 30 days, and by own, they mean the day you take possession of it.

If you open the RRSP now, and make the contribution you will be able to pull the amount out in June under the program.

Keep your records for everything after the fact!

I received a letter from CRA over 3 years after withdrawing under HBP and needed to provide proof of the date I took possession, when I received the funds from the RSP etc.

[mazdavirgin]

Originally posted by 16hypen3sp

But of all the opinions I have heard about it, one really stands out.

"Why would anyone ever do that? You be the biggest fucking fool on the planet! Why would you convert your rrsp into a debt like that? Can you imagine?"

That's pretty spot on the money in terms of my feelings about the program. It's a real fiasco and boondoggle along the lines of the 40 year 5% mortgage disaster Harper gave us all...

Fun article on the topic: http://www.theglobeandmail.com/globe...rticle8211010/

[dirtsniffer]

Typically if something appreciates it is not a debt and it is an asset. I would guess that in the last decade housing in calgary has it preformed most rrsp portfolios.

It makes sense for me because of company matching a significant portion of my savings is in my rrsp.

[16hypen3sp]

Interesting article there mazdavirgin. I used to have the same outlook on the program before I was convinced by my friends to use the free money given to me by my workplace to supplement my down payment.

There is a definite culture in Canada about home ownership... and I've seen both sides of the argument between ownership and just renting for life.

On another note about RRSPs, some friends say they're just a waste of time and don't even bother with them.

[TimLacroix]

Originally posted by vkesava1
Hi there,

I have a question for you regarding the home buyers plan that allows you to take money out of RRSP.

I am currently building a home which will be ready to take possession June 2015.

I am thinking of opening a RRSP account now and will i be able to withdraw funds from the RRSP via home buyers plan if needed during the time of possession ?

I checked the CRA website, its bit confusing it says "

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

i have signed up the purchase agreement for building the home, what do they mean by " own " ? is that possession ? please help. Thanks

Hi vkesava1,

Your questions were pretty much answered by everyone but will quickly summarize:

If you are going to make a lump sum contribution into the RRSP and withdraw it for down payment purposes, the money needs to be in the account for 90 days before withdrawing it.. to a maximum of $25,000 each.

If you deposit into RRSP prior to end of February, you will receive a tax rebate based on the tax level of your income. And have time to make the withdrawal for down payment.

You currently do not own your home yet, you are in an agreement to own so the 30 day ownership above does not apply yet. Once you are given possession you have 30 days to withdraw your RRSP's... however, this is no good since you need the funds prior to possession for your down payment.

I have not heard of anyone withdrawing RRSP's after they take possession but the program allows for it...

[TimLacroix]

Originally posted by navdeep
Me and my wife doing the same thing


Question how much do you guys think I can get in a tax return if I put on $25000

Hi navdeep,

Here is a quick calculator to help you determine your tax rate and then you can figure out your refund.

Simple Tax Calculator

[blownz]

Something to keep in mind when using the HBP which is where I have seen a few people screw up:

Lets say you have to pay back $3k per year and you think "well, I make $100k a year and I have 5% deducted from my pay for RRSP's and my company matches so I put in $10k per year so I am good".

Now it is true you have put enough money in to pay back your "loan", but your company adjusted your tax to assume the $10k was fully tax free when only $7k was and then when you do your tax return you end up with a $1k bill.

I have seen several people make this mistake and most new home owners are quite broke and so they will pay this tax bill with a HELOC or LOC.

Just something to keep in mind.

Personally the only thing I have against the HBP is that I think you should have to prove you can save money before you buy a house and if the only way you can save money is to have your company put RRSP money into an account for you, you have a big problem.

[sabad66]

Originally posted by mazdavirgin


That's pretty spot on the money in terms of my feelings about the program. It's a real fiasco and boondoggle along the lines of the 40 year 5% mortgage disaster Harper gave us all...

Fun article on the topic: http://www.theglobeandmail.com/globe...rticle8211010/

I don't agree with this article at all... the main gripes in the article are based on the assumption that people don't pay it back and don't end up saving enough for retirement.

If you're responsible enough to pay it back then what's the issue? If you take out the max 25k, that's $1667 per year (140 a month) you have to pay back. That doesn't seem too hard IMO.

That said, there are definitely other concerns with HBP like making it too easy to buy a home which props up the market higher than it would be otherwise

[eblend]

Originally posted by BrknFngrs
[B]

What are you basing this on? Just the fact that CRA would be unlikely to review how you spent the funds?

Conditions for participating in the program are pretty strict and it would be pretty brutal for them to determine that you failed to meet these conditions after a withdrawal (ie: your withdrawal would be fully taxable in the year it was taken out)

"There is no tax rule that you have to use your RRSP loan to pay down your mortgage, or even put the money into your home, for that matter. The tax rules only require that the loan must be secured by Canadian real estate." - http://www.mondaq.com/canada/x/28886...into+Your+RRSP

I just did a quick google search, I am sure there is a more legit site somewhere explaining this as well, but this is what I have always heard about the program. As long as you are legitimately buying a house and meet all conditions of HBP, the bank just allows you to take those funds as cash, what you do with that cash is really up to you, not like they can track it

[eblend]

Originally posted by navdeep


I made $55000

If you made $55,000, have no other deductions, and were taxed correctly by your company to the penny, you are looking at about $7051 dollars in tax refund

Here are some screenshots (says 2013...so not sure how numbers have changed if any, use as a rough guide):

0 balance, perfect taxation



Same numbers, with 25k in rrsp contribution



Can play with the numbers here:

http://turbotax.intuit.ca/tax-resour...calculator.jsp