Home Buyers’ Plan (HBP) allows first-time homebuyers to withdraw RRSP to purchase or build a home without having to pay tax on the withdrawal.

RRSP Withdrawal Limit for HBP

• Individual: $25,000
• Couple: $50,000

The HBP withdrawal limit has increased to $25,000 from $20,000. This applies to withdrawal made after January 27, 2009. It will allow a couple to withdraw up to $50,000 from their RRSP funds toward the purchase of their first home.

This is the first increase in the withdrawal limit since the HBP was introduced in 1992.

Amounts withdrawn are repayable in installments over a period not exceeding 15 years, starting the second year following the year the withdrawal was made.

Eligibility

First-time homebuyers are eligible, provided that the home to be purchased or built is the principal place of residence. An individual is generally considered a first-time homebuyer if the individual did NOT owned another home in the year the HBP withdrawal is made, or in any of the four preceding calendar years. In other words, if you bought a home 5 years ago, you will still be a first-time homebuyer provided the new home will be your principal residence.

Special HBP Tactics

If you withdraw your RRSP toward your first home under the HBP this year, you can utilize HBP again after another 4 years! That’s a income tax saving on the withdrawal amount $25,000 (ie, a tax saving of $3750 at the lowest income tax bracket 15%)!!! What you have to do is…declare your new home as the principal residence and your previous home as rental property. Sweet. Oh yeah, repeat this tactic every 5th year.



Reference: Canada Revenue Agency

What Others Are Reading…

• My Networth: May 2009
• My Networth: August 2009
• My Networth: July 2009
• My Networth: June 2009
• RRSP vs TFSA

Like I said in my previous networth report, I want to put aside 20 grands in RRSP savings account so that I can withdraw it towards my first home purchase in the near future. I’m almost there. Just $100 more deposit which I will make in two weeks. Based on my income tax return, the notice of assessment indicates I can contribute up to $21,000 for the Year 2009 RRSP (vs the median national annual RRSP contribution for Year 2007). I’ll reach that maximum contribution room next month, so I have to start thinking where to invest my money after next month. Any suggestion?

My networth is still far from million dollar mark, because I had $160,000 education-related debts to pay after graduation two years ago. I’m glad I completely eliminated them last month. Now I can start building towards my financial growth.

Financial Statement

Financial goal: first million networth in 7 years
Time lapse: 2 years 1 month
Time remaining: 4 years 11 months

Assets	$111,500
RRSP	$19,600
RRSP for First Home Buyers’ Plan (HBP)	$19,900
TFSA	$5,000
High Interest Savings	$47,900
Car minus 30% depreciation rate for year 2008 & 2009	$19,100
Liabilities	($68,400)
Income Tax & CPP Tax (estimated for tax year 2009)	($43,200)
Car Loan	($25,200)
Equity
Networth	$43,100

What Others Are Reading…

• My Networth: June 2009
• My Networth: April 2009
• My Networth: August 2009
• My Networth: July 2009
• RRSP vs TFSA