Fundamentals for using building blocks from your RSP to buy a home. The Canadian Homebuyers' Plan allows you to borrow funds from your Registered Retirement Saving Plan (RRSP or RSP for short) to buy your first home. If you qualify, you and your spouse can each borrow up to $20,000 from your Registered Retirement Savings Plans to use as a down payment on a home. Combined, that's a total of $40,000 that may be available to you. You then have 15 years to repay your RRSP.
Here's what you need to know:
Even if you have already saved for your down payment, it may make good financial sense to access your savings through the Home Buyers' Plan. For example, if you had already saved $20,000 for a down payment - and assuming you still had enough "contribution room" in your RRSP for a contribution of that amount you could move your savings into a registered investment at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers' Plan.
The advantage? Your $20,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.
While using your RRSP for a down payment may help you buy a home sooner, it can also mean missing out on some tax-sheltered growth. So be sure to ask your financial planner whether this strategy makes sense for you, given your personal financial situation.
To provide a savings plan and refundable tax credit that helps lower-income individuals and couples (married or in a common-law partnership) save towards the purchase of a first home.
The Income Tax Related Programs Branch in the Tax Revenue Division of the Ministry of Finance administers the OHOSP program, in partnership with participating financial institutions.
Contributions to OHOSP's are made at participating financial institutions. Joint OHOSP's are not available, so each spouse or common-law partner may open a separate plan.
Claim your tax credit on the ON 479 Ontario Credits form included with your federal income tax return.
The Land Transfer Tax Refund Program, available to purchasers of newly constructed homes only, is administered by the Motor Fuels and Tobacco Tax Branch in the Tax Revenue Division of the Ministry of Finance.
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