Real Estate

RRSP & Home Buyer Plan - 90 Day RRSP Wait prior to withdrawal question

  • Last Updated:
  • Sep 13th, 2017 9:57 pm
[OP]
Jr. Member
Aug 5, 2007
174 posts
9 upvotes

RRSP & Home Buyer Plan - 90 Day RRSP Wait prior to withdrawal question

I have a question regarding the requirement to have funds in an RRSP for 90 days prior to being allowed to utilize the funds to purchase your first home.

Say you have $25k in RRSP funds already (in stocks) which is over 90 days old. Can you add an additional $25k (in cash) and use the amount immediately to purchase your first home? Or does the cash need to be there for 90 days?

One way around it I guess would be to sell the stocks, use the cash generated from stock sales to purchase the home, and re-purchase the stocks using your new cash. Downside I see to this though are the stock transaction fees.
24 replies
Newbie
Mar 2, 2016
76 posts
14 upvotes
If it's for HBP it would have to be in there for 90 days. I could be wrong but the max should be 25k tax free you could withdraw for HBP
Deal Addict
Feb 2, 2014
3736 posts
655 upvotes
Toronto
Raptorfan6 wrote:
Sep 12th, 2017 8:14 am
If it's for HBP it would have to be in there for 90 days. I could be wrong but the max should be 25k tax free you could withdraw for HBP
Ya, I think what OP is saying, is that he doesn't want to sell the $25k in stocks. So his plan is to put $25k in his RRSP and withdraw that instead .

But why would you put the $25k in the RRSP if you already have it in cash OP?
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
Deal Addict
User avatar
Mar 23, 2008
4103 posts
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Edmonton
If I had to guess (and that's all this is), if you deposited the cash into your RRSP and then took it out right away, it SHOULD be ok. CRA wouldn't care (for example), if you had 25k of "old" stocks and $5k of "new" stocks and cashed out $20 and 5k respectively. So long as you can demonstrate a balance of $25k 90 days in advance, I think it should be ok.

But call the CRA. That's too much money to play around with, and the penalties could be significant.

To some of the others, he could be wanting to do things this way so he can take advantage of the tax breaks for using the RRSP funds. If he deposits the $25k he's got in cash, he gets a tax break on that money. If he withdraws it after, he's not taxed on it because it's a HBP withdrawal. It makes sense in my head... :)

C
Newbie
Sep 15, 2014
87 posts
41 upvotes
CdnRealEstateGuy wrote:
Sep 12th, 2017 4:20 pm
Ya, I think what OP is saying, is that he doesn't want to sell the $25k in stocks. So his plan is to put $25k in his RRSP and withdraw that instead .

But why would you put the $25k in the RRSP if you already have it in cash OP?
Maybe the big tax refund come April that OP will get?

I'm also curious as to the answer to this. My guess is no, you can not immediately withdraw the $25k in cash from RRSP after depositing, you'd have to leave those new funds for 90 days.
Deal Addict
User avatar
Mar 23, 2008
4103 posts
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Edmonton
From the CRA website:
Your RRSP deduction may be affected by your participation in the HBP

If you participate in the HBP, certain rules limit the deduction of your RRSP contributions made during the 89 day period before you withdrew funds under the HBP. Under these rules, you may not be able to deduct part or all of the contributions made during this period for any year.

During that period, you cannot deduct the amount by which the total of your contributions to an RRSP is more than the fair market value of that RRSP after the withdrawal.

The same rules apply if you contributed to your spouse's or common-law partner's RRSP during the 89 day period before that individual made the withdrawal from the same RRSP under the HBP.

In other words, for contributions made to an RRSP in the 89 day period to be fully deductible, the value of that RRSP after you withdrew funds must be at least equal to those contributions.
C
[OP]
Jr. Member
Aug 5, 2007
174 posts
9 upvotes
CNeufeld wrote:
Sep 12th, 2017 4:30 pm
If I had to guess (and that's all this is), if you deposited the cash into your RRSP and then took it out right away, it SHOULD be ok. CRA wouldn't care (for example), if you had 25k of "old" stocks and $5k of "new" stocks and cashed out $20 and 5k respectively. So long as you can demonstrate a balance of $25k 90 days in advance, I think it should be ok.

But call the CRA. That's too much money to play around with, and the penalties could be significant.

To some of the others, he could be wanting to do things this way so he can take advantage of the tax breaks for using the RRSP funds. If he deposits the $25k he's got in cash, he gets a tax break on that money. If he withdraws it after, he's not taxed on it because it's a HBP withdrawal. It makes sense in my head... :)
That's exactly what I was thinking. Good idea on calling the CRA.
[OP]
Jr. Member
Aug 5, 2007
174 posts
9 upvotes
In other words, for contributions made to an RRSP in the 89 day period to be fully deductible, the value of that RRSP after you withdrew funds must be at least equal to those contributions.

That's the wording that confuses me. I guess I should contact the CRA for confirmation.
Deal Addict
Aug 12, 2004
3808 posts
1076 upvotes
Calgary
OP one thing of note, while you will get a tax refund by putting 25K in your rrsp for that year, you will have to repay the 25K back into your RRSP over the next 15 years, which the income you use to repay is still taxed (as it does not count towards your rrsp contribution). As long as you think of it as an interest 'free' loan from yourself it is fine, but there is no free lunch. That 25K will also be stuck into your RRSP after you have repaid it.
Deal Addict
Aug 12, 2004
3808 posts
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Calgary
bender2k wrote:
Sep 12th, 2017 5:21 pm
In other words, for contributions made to an RRSP in the 89 day period to be fully deductible, the value of that RRSP after you withdrew funds must be at least equal to those contributions.

That's the wording that confuses me. I guess I should contact the CRA for confirmation.
It just means this: You have 10K in your RRSP already from over 90 days. You put in 5K in your RRSP, and your RRSP gains 1K because of a stock going crazy up. You can pull 11K within 89 days, but not 16K because you still need 5K to remain to match your <90 day contribution. The wording is to take in account market fluctuations.
Deal Fanatic
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Jul 14, 2008
7541 posts
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Ontario
Firebot wrote:
Sep 12th, 2017 6:41 pm
OP one thing of note, while you will get a tax refund by putting 25K in your rrsp for that year, you will have to repay the 25K back into your RRSP over the next 15 years, which the income you use to repay is still taxed (as it does not count towards your rrsp contribution). As long as you think of it as an interest 'free' loan from yourself it is fine, but there is no free lunch. That 25K will also be stuck into your RRSP after you have repaid it.
I believe there is a grace period (2 years?), then the 15 year payback starts. And you can choose to pay it back sooner as well. You just allocate whatever amount you want, a minimum of 1/15, for that year.

You don't technically need to pay it back. You can also add the 1/15 of what you withdrew as income for that year. I've known someone who was in a high tax bracket when depositing and withdrawing using HPB, and added that portion as income instead of paying back when a stay at home parent for a few years.
Newbie
Oct 26, 2007
59 posts
13 upvotes
I creatively obtained $25k in rrsp tax deferrals by depositing $8333 in an rrsp for 90 days withdrew it under the HBP then redeposited (for 90 days) & withdrew it 2 more times.
Sr. Member
Dec 28, 2006
856 posts
167 upvotes
bender2k wrote:
Sep 12th, 2017 5:21 pm
In other words, for contributions made to an RRSP in the 89 day period to be fully deductible, the value of that RRSP after you withdrew funds must be at least equal to those contributions.

That's the wording that confuses me. I guess I should contact the CRA for confirmation.
Wording seems pretty clear to me.

If you put $1 in your RRSP in the 89 days before, you can't withdraw your account below $1.

If you put $10,000 in your RRSP in the 89 days before, you can't withdraw your account below $10,000.

If you put $50,000 in your RRSP in the 89 days before, you can't withdraw your account below $50,000.

All it cares about is total balance.

Example:

Balance 91 days before: $5,000

80 days before, you deposit $10,000. New balance = $5,000 + $10,000 = $15,000.

50 days before, you deposit $10,000. New balance = $15,000 + $10,000 = $25,000.

Total contributions made in the 89 days before = $10,000 + $10,000 = $20,000.

That rule says you can't withdraw your account below $20,000.

The rule doesn't care what money you withdraw, it only cares that you don't withdraw your account below $20,000.
Member
Oct 28, 2006
301 posts
116 upvotes
If you have a house closing at the end of the month, at what point can you make a withdrawal and up to what point can you make a contribution and then withdrawal? Is it only up till the date the house closes?
Deal Addict
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Dec 27, 2009
3286 posts
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Ottawa, ON
CdnRealEstateGuy wrote:
Sep 12th, 2017 4:20 pm
Ya, I think what OP is saying, is that he doesn't want to sell the $25k in stocks. So his plan is to put $25k in his RRSP and withdraw that instead .

But why would you put the $25k in the RRSP if you already have it in cash OP?
To get the tax benefit for this year I'm guessing.

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