Real Estate

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

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  • Sep 13th, 2017 9:57 pm
Deal Addict
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Dec 27, 2009
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Ottawa, ON
negotiater wrote:
Sep 13th, 2017 9:38 am
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.
???
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Jul 14, 2008
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Ontario
negotiater wrote:
Sep 13th, 2017 9:38 am
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.
Wait, what?

Are you saying:
Day 1: deposit $8333
Day 90: withdraw $8333
Day 90: deposit $8333
Day 180: withdraw $8333
Day 180: deposit $8334
Day 270: withdraw $8334

Are you suggesting doing this resulted in a tax deferral as if you deposited $25k, at tax time?
Jr. Member
Sep 12, 2017
141 posts
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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.
If you don't want to pay back the 25K over 15 years. Do you just pay tax on ($25K/15), $1.6K every year? Can you skip years?
Newbie
Oct 26, 2007
60 posts
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onlineharvest wrote:
Sep 13th, 2017 11:52 am
Wait, what?

Are you saying:
Day 1: deposit $8333
Day 90: withdraw $8333
Day 90: deposit $8333
Day 180: withdraw $8333
Day 180: deposit $8334
Day 270: withdraw $8334

Are you suggesting doing this resulted in a tax deferral as if you deposited $25k, at tax time?
Correct! I'm a CPA & love coming up with creative tax strategies such as this!
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Jul 14, 2008
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reggyDeal wrote:
Sep 13th, 2017 1:40 pm
If you don't want to pay back the 25K over 15 years. Do you just pay tax on ($25K/15), $1.6K every year? Can you skip years?
You can't skip a year. If you don't pay it gets added as income. I mentioned earlier I knew someone who has next to no income for a few years and decided to not pay back the portion and paid zero income taxes (so they net gained for those years because they were in a high bracket when contributing).

You can, however, pay the whole or more than 1/15 anytime you like. You contribute to the RRSP in the same way as always, but declare what portion goes towards HBP payback at tax time. IIRC, if you pay more than 1/15 and still have a balance, you will owe 1/x of the balance next year, x being the number of years remaining of your 15 years.
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Jul 14, 2008
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negotiater wrote:
Sep 13th, 2017 1:46 pm
Correct! I'm a CPA & love coming up with creative tax strategies such as this!
Assuming you want to contribute as much towards your down payment as possible, and have the actual $25k to put in your RRSP anyway, doesn't that make this maneuver irrelevant?

If I want to put $100k as a DP (and have it available), there is no difference between your maneuver and merely putting $25K in and withdraw when necessary. If you only had $8333, ok, but if you have anything over $25k, I don't see the value in doing this when the sum you have at the end is the same, tax deferral amount the same, etc.
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Oct 26, 2007
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onlineharvest wrote:
Sep 13th, 2017 1:59 pm
Assuming you want to contribute as much towards your down payment as possible, and have the actual $25k to put in your RRSP anyway, doesn't that make this maneuver irrelevant?

If I want to put $100k as a DP (and have it available), there is no difference between your maneuver and merely putting $25K in and withdraw when necessary. If you only had $8333, ok, but if you have anything over $25k, I don't see the value in doing this when the sum you have at the end is the same, tax deferral amount the same, etc.
Yes, if you have $25k available inside or outside an rrsp (such as the OP) there is no difference, if you have anything less this method is more advantageous.
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Jul 14, 2008
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negotiater wrote:
Sep 13th, 2017 2:21 pm
Yes, if you have $25k available inside or outside an rrsp (such as the OP) there is no difference, if you have anything less this method is more advantageous.
Since we're talking about money towards a down payment, when would it ever be less than $25K. Curious, as I can't think of an advantageous scenario. :)
Newbie
Oct 26, 2007
60 posts
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onlineharvest wrote:
Sep 13th, 2017 2:27 pm
Since we're talking about money towards a down payment, when would it ever be less than $25K. Curious, as I can't think of an advantageous scenario. :)
You can spend the money on whatever you want, it doesn't need to be for a down payment.
Member
Oct 2, 2013
498 posts
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Mississauga
onlineharvest wrote:
Sep 13th, 2017 11:52 am
Wait, what?

Are you saying:
Day 1: deposit $8333
Day 90: withdraw $8333
Day 90: deposit $8333
Day 180: withdraw $8333
Day 180: deposit $8334
Day 270: withdraw $8334

Are you suggesting doing this resulted in a tax deferral as if you deposited $25k, at tax time?
negotiater wrote:
Sep 13th, 2017 1:46 pm
Correct! I'm a CPA & love coming up with creative tax strategies such as this!
negotiater wrote:
Sep 13th, 2017 2:41 pm
You can spend the money on whatever you want, it doesn't need to be for a down payment.

Can you or anyone explain this, i am learning the rules of HBP and dont understand this.

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