By Sophie Lalonde | October 30, 2024
The Home Buyers’ Plan (HBP) enables Canadians to withdraw from their RRSPs, PRPPs, or SPPs for a home purchase or build. This article outlines the HBP’s 15-year repayment terms, including a 2024 update allowing a three-year repayment deferral for recent participants. It also addresses special situations, such as death, reaching age 71, or non-residency, which may impact repayment obligations. Practical guidance on repayment methods, excess or insufficient payments, and tax implications supports participants in meeting HBP requirements effectively.
Quick Reference
- Repayment Period: 15 years, starting the second year after withdrawal (or fifth year for 2022-2025 withdrawals).
- Contribution Deadlines: Repay by year-end or within the first 60 days of the following year.
- Missed Payments: Any unpaid amount is added to taxable income.
- Special Situations:
- Death: Remaining balance may be transferred to a spouse or added to income.
- Turning 71: Repay remaining balance or add to income.
- Non-Residency: Repay balance or add to income.
When Do You Begin Repayment?
You have up to 15 years to repay the amounts withdrawn from your RRSPs under the HBP. Normally, the repayment period begins the second year after the year in which you made your first withdrawal.
Temporary Repayment Relief (2024 Revision):
A provisional suspension implemented in 2024 permits participants who initiated their first withdrawal from January 1, 2022, to December 31, 2025, to postpone the commencement of their repayment phase by three years. Therefore, the 15-year repayment period will begin the fifth year after the first withdrawal.
If you withdrew funds before January 1, 2022, your repayment period started as per the previous rule: the second year after the year of withdrawal.
You can repay the full amount at any time. If you make repayments early, they will reduce your HBP balance and the amount you need to repay for the following years.
Repaying the Amount You Withdrew
To meet your repayment requirements as per the HBP, you must make contributions to your RRSPs, PRPPs, or SPP either within the year the repayment is required or within the initial 60 days of the subsequent year. You must then designate these contributions as repayments.
Each year, the Canada Revenue Agency (CRA) will send an HBP statement of account detailing your repayments, remaining balance, and the required repayment for the next year.
Important Notes:
- Repayments do not affect your RRSP deduction limit.
- You cannot claim a deduction for HBP repayments on your income tax return.
Repaying More or Less than the Minimum Required Repayment
Repaying More:
If you repay more than the minimum amount, the extra will reduce your HBP balance and lower future repayment amounts. You will still need to make annual repayments until the balance reaches zero.
Repaying Less:
If you repay less than the required minimum, the difference will be added to your income as RRSP income on line 12900 of your income tax return.
Not Repaying:
If no repayment is made, the minimum required repayment amount will be included in your income for that year.
Special Repayment Situations
Certain situations affect repayment under the HBP, such as:
- Death: If the participant dies, their HBP balance is included in their income unless their surviving spouse or common-law partner elects to take over the repayments.
- Turning 71: Once you turn 71, you can no longer contribute to RRSPs. You must either repay the remaining balance or include the amount in your income over the remaining years.
- Non-residency: If you become a non-resident, you must either repay the balance or include the remaining amount as income.
Conclusion
Repaying amounts withdrawn under the HBP is an important obligation that extends up to 15 years, with flexibility for early or deferred repayments in certain situations. Stay informed of your HBP balance and ensure timely repayments to avoid additional tax liabilities.
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