Home Buyers' Plan (HBP)

The HBP is a program that allows an individual to withdraw funds from their Registered Retirement Savings Plan (RRSP), with no immediate tax consequences, to buy or build a qualifying home for themselves or for a related person with a disability. The individual (or the related person with a disability) must have a written agreement to buy or build the qualifying home before the time of the withdrawal.

Amounts withdrawn under the HBP must be repaid on a non-deductible basis to an RRSP over a period not exceeding 15 years, beginning the second calendar year following the calendar year in which the withdrawal was made. Any amount that is not repaid in a year will be included in the individual’s income for that year. A special rule denies an RRSP deduction for contributions that are withdrawn under the HBP within 90 days of being contributed.

Prior to March 20, 2019, the maximum amount that an individual can withdraw in a calendar year from an RRSP to buy or build a qualifying home without having to pay tax on the withdrawal was $25,000. For 2019 and subsequent years, the budget proposes to increase the maximum amount to $35,000, for withdrawals made after March 19, 2019.

The Canada Revenue Agency (CRA) is currently administering the $35,000 withdrawal limit on the basis of the Budget 2019 proposal, consistent with its standard practice for proposed tax measures.

If you made an HBP withdrawal before 2019 and your HBP balance was not zero at the beginning of 2019, then additional withdrawals are not permitted.

If your HBP withdrawal was made between January 1, 2019 and March 19, 2019 inclusively and you satisfy the existing requirement that neither you nor your spouse or common-law partner owned the qualifying home for more than 30 days before making the final withdrawal in 2019, then you can withdraw additional funds after March 19, 2019, as long as the total of all your withdrawals in 2019 does not exceed the new maximum amount of $35,000.

One of the conditions that an individual buying or building a qualifying home for themselves must satisfy in order to make a withdrawal under the HBP, is that they must be considered a “first-time home buyer” at the time of the withdrawal. This condition does not apply when buying or building a qualifying home for a related person with a disability.

An individual will be considered a first-time home buyer at the time of an HBP withdrawal if, during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the date of the withdrawal (referred to below as the “four-year period”), the individual, or the individual’s spouse or common-law partner, did not own and occupy a home that was the individual’s principal place of residence.

In this scenario, you would most likely not be considered a first-time home buyer under the existing HBP rules. In particular, you will not be considered a first-time home buyer if, at any time during the four-year period:

• you, or your spouse or common-law partner, owned and occupied the matrimonial home; and
• the matrimonial home was your principal place of residence.

For HBP withdrawals made after 2019, the budget proposes to permit an individual who would not otherwise be considered a first-time home buyer under the HBP at the time of the withdrawal to be considered a first-time home buyer if:

• at the time of the withdrawal, the individual:
  • is living separate and apart from their spouse or common-law partner because of a breakdown of their marriage or common-law partnership,
  • has been living separate and apart from their spouse or common-law partner for a period of at least 90 days, and
  • began living separate and apart from their spouse or common-law partner in the year of the withdrawal or in the four preceding calendar years; and
• where the individual owns and occupies a home that was the individual’s principal place of residence at the time of the withdrawal, either:
  • that home is not the qualifying home that the individual intends to acquire with the funds obtained from the withdrawal, and the individual sells the home (or disposes of their interest or right in the home to their separated spouse or common-law partner) no later than the end of the second calendar year after the year of the withdrawal, or
  • the individual otherwise acquires the interest or right of their separated spouse or common-law partner in the home (e.g., where the home is the matrimonial home) no earlier than 30 days before the withdrawal and no later than September 30^th of the year following the withdrawal; and
• if the individual has a new spouse or common-law partner at the time of the withdrawal, the new spouse or common-law partner does not own and occupy a home that is the individual's principal place of residence.

Under the existing HBP rules, an individual must generally acquire the qualifying home before October 1st of the year following the year of the HBP withdrawal. In addition, neither the individual nor their spouse or common-law partner can have acquired the home more than 30 days before making the withdrawal.

For the purposes of determining whether an individual has satisfied the two conditions described above, the budget proposes to deem an individual who holds an interest or right in a qualifying home at the time of an HBP withdrawal and subsequently acquires the interest or right of their separated spouse or common-law partner in the home, to have acquired the qualifying home at the time they acquired the interest or right of their separated spouse or common-law partner.

The effect of the proposed change is that the individual will not be considered to have acquired the qualifying home at the time that they acquired their original interest or right in the home. This will allow the individual to satisfy the two conditions described above (i.e., provided the individual acquires their separated spouse’s interest or right in the matrimonial home no earlier than 30 days before the HBP withdrawal and no later than September 30th of the year following the withdrawal).

The proposed change will apply for HBP withdrawals made after 2019.

For more information, go to What is the Home Buyers' Plan (HBP)?

The CRA provides the latest information on the proposed changes on Canada.ca. Taxpayers should check online regularly for updated forms, policies, guidelines, questions and answers, and guidance.

In the meantime, please consult the Department of Finance Canada's Budget 2019 documents for details.