Personal Finance

Withdraw HBP Repayment - Is This Allowed?

  • Last Updated:
  • Jun 4th, 2019 1:51 pm
[OP]
Member
Jun 2, 2007
410 posts
52 upvotes
Toronto

Withdraw HBP Repayment - Is This Allowed?

Hi guys,

Something I was wondering today but I couldn't find an answer online.

If you take out funds under the Homebuyers Plan, and then start your repayments, can you then take those funds out again? Of course this would be considered taxable income, but does it affect the HBP repayment schedule? I understand you would also lose RRSP contribution room.

As an example:

2019 - You take $25k out of your RRSP under the HBP
2020 - You contribute $5k to your RRSP (attributing this as a HBP repayment when you do your taxes)
2021 - Can you now withdraw the $5k (as taxable income), as long as you make sure you also contribute your scheduled HBP repayment that year?
11 replies
Sr. Member
Aug 20, 2015
514 posts
301 upvotes
Toronto
I'm pretty sure these two are taken into account independently.

1) You withdraw 5k in 2021 from your RRSP, this is considered taxable income.

2) You take out $25k from your RRSP under HBP in 2019. This means your first repayment does not begin until 2021.
In 2020 you chose to pay back $5k into HBP. Therefore your first repayment would be equal to $20000/15 = $1333.33.
You can choose to either repay the $1333.33, or it would be considered taxable income for the year if you do not.

If you chose not to pay back into your HBP in 2021, my guess would be that you would have $5k cash from the RRSP withdrawal, and an increase of $6333.33 to your taxable income.
Deal Addict
User avatar
Jan 2, 2012
3979 posts
1847 upvotes
Toronto
quick90 wrote: Hi guys,

Something I was wondering today but I couldn't find an answer online.

If you take out funds under the Homebuyers Plan, and then start your repayments, can you then take those funds out again? Of course this would be considered taxable income, but does it affect the HBP repayment schedule? I understand you would also lose RRSP contribution room.

As an example:

2019 - You take $25k out of your RRSP under the HBP
2020 - You contribute $5k to your RRSP (attributing this as a HBP repayment when you do your taxes)
2021 - Can you now withdraw the $5k (as taxable income), as long as you make sure you also contribute your scheduled HBP repayment that year?
Once you re-pay your RRSP with each HBP re-payment, you can then do whatever you want with your RRSP.
[OP]
Member
Jun 2, 2007
410 posts
52 upvotes
Toronto
rob444 wrote: Once you re-pay your RRSP with each HBP re-payment, you can then do whatever you want with your RRSP.
Thanks Rob - that answers the question.
Sr. Member
Dec 22, 2007
701 posts
350 upvotes
Mississauga
quick90 wrote: Thanks Rob - that answers the question.
If that is your plan you can also not pay back the hbp and it will add it yearly to your income
Deal Addict
User avatar
Jul 4, 2006
3598 posts
688 upvotes
If you withdraw from the RRSP, IIRC:
1. there will be withholding taxes at the source
2. you do not get the contribution room back
Newbie
Apr 26, 2014
37 posts
3 upvotes
Toronto, Ontario
What is the withholding tax rate if you draw the funds from RRSP outside of HBP?
My issue is that I sold my principle property in 2017 and I'm currently renting. So I won't qualify for home buyer plan for another two years. So I'm wondering if I should draw the money from my RRSP and pay the withholding tax or wait for few more years until I qualify for home buyer plan under the 4 year rule?
Deal Addict
User avatar
Jul 4, 2006
3598 posts
688 upvotes
Marketcap wrote: What is the withholding tax rate if you draw the funds from RRSP outside of HBP?
My issue is that I sold my principle property in 2017 and I'm currently renting. So I won't qualify for home buyer plan for another two years. So I'm wondering if I should draw the money from my RRSP and pay the withholding tax or wait for few more years until I qualify for home buyer plan under the 4 year rule?
What happened to the proceeds from the sale of your last home? It's not a good idea to withdraw from your RRSP.

You've posted this twice and really, it's a bad idea because you pay tax on it *and* you don't get the contribution room back so you don't get sheltered growth after you have the funds back.

The withholding tax was easily found on google. https://www.canada.ca/en/revenue-agency ... awals.html.

Also, the page notes that
The tax that was withheld may not always be enough to account for the tax you owe at your tax bracket. You may have to pay more tax on the withdrawal when you include the withdrawal on your income tax and benefit return for that year.
Newbie
Apr 26, 2014
37 posts
3 upvotes
Toronto, Ontario
The proceeds from the sale of my property are in my operating bank account.

However, I have more funds in RRSP which I would like to use to buy a house within the next few months.

I understand I will not qualify for HBP for another two years, are there other options available to draw funds without incurring taxes?
[OP]
Member
Jun 2, 2007
410 posts
52 upvotes
Toronto
I understand it will add to your yearly income, but the HBP repayment amount is mandatory, no? Wouldn't you still have to repay the minimum HBP amount even if you also did a withdrawal?
Deal Fanatic
Nov 22, 2015
5735 posts
5213 upvotes
quick90 wrote: I understand it will add to your yearly income, but the HBP repayment amount is mandatory, no? Wouldn't you still have to repay the minimum HBP amount even if you also did a withdrawal?
No, if you don't make a repayment, that amount is automatically added to your income, and you lose the contribution room.

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