First Time Home Buyers (RRSP) Plan and Tax Credit

Buying a home for the first time is the largest expenditure most Canadians will make. The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time home buyers, who must pay these costs on top of saving the money for a down payment.

Canada's Economic Action Plan supports the Canadian home construction and real estate industries, with a First-Time Home Buyers Tax Credit that will provide up to $750 in tax relief to first-time home buyers; and an increase in the amount that they can withdraw from an RRSP to purchase a home from $20,000 to $25,000. For Home Buyers (RRSP) Plan purposes, an individual is generally considered to be a first-time home buyer if neither the individual nor the individual's spouse or common-law partner owned and lived in another home in the calendar year in which the Home Buyers Plan withdrawal is made or in any of the four preceding calendar years.

Withdrawn funds must generally be used to acquire a home before October of the year following the year of withdrawal. Amounts withdrawn under the Home Buyers Plan are repayable in instalments over a period not exceeding 15 years. To the extent that a scheduled repayment for a year is not made, it is added to the participant's income for the year. A special rule denies an RRSP deduction for contributions withdrawn under the Home Buyer’s Plan within 90 days of being contributed.

This increase in the Home Buyers Plan withdrawal limit will apply to the 2009 and subsequent calendar years in respect of withdrawals made after January 27, 2009.

An estimated 2 million plan users have borrowed more than $15 billion of their own savings from their RRSP’s to purchase a home since the Home Buyers' Plan was introduced in 1992. The Plan has helped in more than 900,000 home purchases.

For more information on the First Time Home Buyers (RRSP) Plan visit: Canada Revenue Agency HBP

Or, the First Time Home Buyers Tax Credit visit: Canada Revenue Agency Tax Credit