FIRST TIME HOME BUYERS PLAN
The government of Canada has introduced a First time Home Buyers’ plan to ease the load that home buying costs may exert upon its residents. The first time home buyers’ plan is a program that allows you to withdraw up to $25,000 in a certain year from your Registered Retirement Savings Plan (RRSPs) for yourself. You can also participate actively in a first time home buyers’ plan for a related person with disability. However, this plan is not available for everyone and there are certain conditions that you need to meet to avail yourself with one of these.
To participate in the first time home buyers’ plan from the government of Canada, you need to be eligible for both the Home buyers’ plan and RRSP withdrawal conditions.
Eligibility conditions for First Time Home Buyers’ Plan:
In order for the government to consider yourself as eligible for the HBP, you need to be considered as a first time home buyer. You are considered a first-time home buyer if, in the previous four year period before you intend to withdraw the money, you did not live in a home that you or your current spouse or common-law partner owned. The wording is very specific: ….”Begins on January 1 of the fourth year before the year you withdraw funds; and Ends 31 days before the date you withdraw the funds”. For Example: If you want to withdraw your money on the 31st of May, 2015, the four year period begins on January 31st of 2011 and ends on April 30th, 2015. If you or your common law partner did not own a home during this period, but owned a home before that four year period, you will still be counted as eligible for the plan. Also another stipulation, and most importantly, you have to intend to live in the house (even if you are building it0 and use it as your principal place of residence for at least one year from the time you build or buy it.
Meeting the RRSP Withdrawal Conditions:
There are certain conditions for withdrawing money from your RRSPs:
(1) You must be a resident of Canada at the time of withdrawing.
(2) You cannot withdraw more than $25000 in a given year (per relevant individual).
(3)An individual may have multiple RRSPs, then that individual can withdraw up to $25000 per year from each account given that he/she is the owner of each individual RRSP. You will not be allowed to withdraw money from a locked in RRSP or a group RRSP.
(4) If you are the person who is entitled to receive the money from your RRSP, then only you can receive it, even your family members cannot withdraw money from it
(5) Neither you nor your spouse or common-law partner or the related person with a disability that you buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.
(6) Your RRSP contributions must stay in your RRSP account for at least 30 days before you can make a withdrawal.
Before you take the steps to participate in the first time Home Buyers’ plan, make sure that you meet all the required conditions because if you withdraw money from your RRSP and do not meet a certain condition, your RRSP withdrawal may not be considered eligible in which case the money that you withdraw will be added as income on your income tax return for the year you received the funds.