Real Estate

HBP RRSP Repayment Penalty

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  • Jun 27th, 2016 10:06 am
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[OP]
Member
Oct 5, 2010
455 posts
370 upvotes

HBP RRSP Repayment Penalty

So I pulled out $15000 in rrsp's out for down payment. So I would have to pay back 1/15 ($1000) a year. If I didn't pay it back I would be taxed on a extra $1000 a year which I don't see being more than $400 in taxes. So what would be a benefit of paying it back?
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Member
Sep 1, 2013
403 posts
96 upvotes
d60 wrote: So I pulled out $15000 in rrsp's out for down payment. So I would have to pay back 1/15 ($1000) a year. If I didn't pay it back I would be taxed on a extra $1000 a year which I don't see being more than $400 in taxes. So what would be a benefit of paying it back?
Why did you put that money into your RRSP in the first place? Clearly, a 40% marginal tax rate wasn't enough of an incentive.
Deal Addict
Apr 4, 2013
1274 posts
407 upvotes
What was your marginal tax rate when you made your RRSP contributions? If it was lower than 40%, say 31%, then you are voluntarily agreeing to pay 9% more tax than you could have. This may increase should your income increase over the next 15 years and your marginal tax rate increase.

There is also the lost investment gain, which I think @Ironcat was referring to above.
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Jul 11, 2011
3515 posts
1866 upvotes
Ontario
cbr663 wrote: What was your marginal tax rate when you made your RRSP contributions? If it was lower than 40%, say 31%, then you are voluntarily agreeing to pay 9% more tax than you could have. This may increase should your income increase over the next 15 years and your marginal tax rate increase.

There is also the lost investment gain, which I think @Ironcat was referring to above.
...but I would think that lost 4-5% of investment gain (inside the RRSP) could be more than offset by the 20-30% gains in the housing markets right now!

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