COVID-19 Update — To assist in our community’s collective effort to combat COVID-19, our physical offices are operating on a restricted basis. Although we are limiting attendance at our office by both firm members and clients, we remain otherwise fully operational and look forward to continuing to provide the highest level of legal services to our clients. Read our full response notice here.

First time homebuyers beware! Withdrawals from your registered retirement savings plan (RRSP) may be taxable.

A Toronto news article described a situation in which a first-time homebuyer withdrew money from her RRSPs without first declaring to her bank that she was a first-time homebuyer – she received a $5,000 tax bill.

To avoid making the same mistake, first-time homebuyers who plan to withdraw money from their RRSP’s for a home down payment should consider participating in the Home Buyers’ Plan (HBP).

Home Buyers’ Plan

The HBP allows each first-time homebuyer to withdraw up to $35,000 from their RRSP’s in a calendar year, to buy a qualifying home without triggering income tax liability on the withdrawn amount. This means that where both spouses have an RRSP, each spouse can withdraw $35,000 from their respective RRSP’s. Each first-time homebuyer can withdraw a single amount or as a series of withdrawals in the same calendar year so long as the total does not exceed $35,000. This $35,000 limit applies to withdrawals made after March 19, 2019.

If a first-time homebuyer has previously participated in the HBP, they may be able to do so again if their repayable HBP balance on January 1st of the year of the subsequent withdrawal is zero and they meet all the other HBP eligibility conditions.

Generally, all withdrawals must be repaid within a period of no more than 15 years. However, the repayment period begins to run on the second year following the year in which you first withdrew the funds. For example, if you withdrew the funds in 2021, your first year of repayment will be 2023.

A first-time homebuyer has to repay at least a prescribed minimum amount to their RRSP’s each year until their HBP balance is zero. If the minimum amount is not repaid in a given year, it will be included in their income for that year. There are no maximum annual repayment limits.

A first-time homebuyer should consult the Canada Revenue Agency’s (CRA) website to determine if they meet the HBP eligibility conditions, and to learn more on how to participate in the program.


At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business lawreal estate lawestate lawemployment law, health law, and tax law. For over 130 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.

Contact Us

2 St Clair Ave West
Suite 1700
Toronto, ON M4V 1L5
Canada

Phone: (416) 863-0125

Fax: (416) 863-3997

Questions? Send us an email.

    Sending an e-mail to us will not make us your lawyers. You will not be considered a client of Mills & Mills LLP until we have agreed to act for you in accordance with our usual policies for accepting clients. No information we provide to you can be treated by you as legal advice, unless and until we have agreed to act for you. Confidential or time-sensitive information should not be sent through this form.