Home Buyers' Plan (HBP)

RC4135(E) Rev. 01

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Table of Contents

• Your opinion counts!
• Before You Start
  • Is this guide for you?
  • What is the HBP?
  • Do you need more information?
  • Forms and Publications
  • Internet access
• Glossary
• Chapter 1 - Participating in the HBP
  • What is the HBP?
    • Can a withdrawal be made from any RRSP?
  • What are the conditions for participating in the HBP?
    • You have to enter into a written agreement to buy or build a qualifying home
    • You have to intend to occupy the qualifying home as your principal place of residence
    • You have to be considered a first-time home buyer
    • Your HBP balance on January 1 of the year of withdrawal has to be zero
    • Neither you nor your spouse or common-law partner can own the qualifying home more than 30 days before the withdrawal
    • You have to be a resident of Canada
    • You have to complete Form T1036
    • You have to receive all withdrawals in the same year
    • You cannot withdraw more than $20,000
    • You have to buy or build the qualifying home before October 1 of the year after the year of withdrawal
    • How do you make an HBP withdrawal?
    • You have to file a tax return
• Chapter 2 - Repaying your withdrawals
  • How do you make your repayments?
  • What happens if you choose to begin your repayments earlier?
  • What happens if you repay more than the amount you have to repay?
  • What happens if you repay less than the amount you have to repay?
  • Situations where the repayments have to be made in less than 15 years
    • If the participant dies
    • If you become a non-resident
    • If you are 70 years of age or over
• Chapter 3 - Other rules you should know
  • What happens if you do not meet all the HBP conditions?
    • Cancelling your participation
  • If you cannot participate in the year, can you participate in a later year?
  • Can you use funds withdrawn under the HBP for other purposes?
  • Can you participate in the Lifelong Learning Plan (LLP) at the same time?

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Before You Start

Is this guide for you?

Use this guide if you want information about the rules that apply to the Home Buyers' Plan (HBP).

What is the HBP?

The HBP is a program that allows you to withdraw up to $20,000 from your registered retirement savings plans (RRSPs) to buy or build a qualifying home. Withdrawals that meet all applicable HBP conditions do not have to be included in your income, and your RRSP issuer will not withhold tax on these amounts. If you buy the qualifying home together with your spouse or common-law partner, or other individuals, each of you can withdraw up to $20,000.

Under the HBP, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. Generally, you will have to repay an amount to your RRSPs each year until you have repaid all the amount you withdrew. If you do not repay the amount due for a year, it will be included in your income for that year.

Do you need more information?

In this guide, we use plain language to explain the most common income tax situations. If you need more information after reading this guide, contact the General Enquiries section of your tax services office. You can find the address and telephone numbers in the government section of your telephone book. They are also available on our Web site under the heading "Contact us" at www.ccra.gc.ca.

Forms and Publications

Throughout the guide, we refer to other forms and publications. You can get these documents from any tax services office or tax centre, or by calling us toll free at 1-800-959-2221.

Internet access

You can find most of our publications at http://www.ccra.gc.ca/formspubs/menu-f.html on the Internet.

Glossary

This glossary gives you a general description of the technical terms that we use in this guide.

Common-law partner - This refers to a person of the opposite or the same sex who is not your spouse (see the definition of spouse on the next page) when you live and have a relationship with that person. In addition, at least one of the following has to apply. He or she:

• is the natural or adoptive parent (legal or in fact) of your child;
• has been living and having a relationship with you for at least 12 continuous months; or
• lived with you previously as your spouse for at least 12 continuous months.

The above includes any period that you were separated for less than 90 days because of a breakdown in the relationship.

Disabled person - For purposes of the HBP, a disabled person includes you or a person related to you by blood, marriage, or adoption, if you or the related person are entitled to the disability amount for the year of the HBP withdrawal. A related disabled person does not have to reside with you in the same home.

We consider a person to be entitled to the disability amount if one of the following situations applies:

• the person was entitled to the disability amount on line 316 of the person's return for the year before the HBP withdrawal, and still meets the eligibility requirements for the disability amount when the HBP withdrawal is made; or
• if the person was not entitled to the disability amount for any year before the HBP withdrawal, a Form T2201, Disability Tax Credit Certificate, that a medical doctor or appropriate medical practitioner (i.e., an optometrist, audiologist, psychologist, or occupational therapist) has certified, is filed for the person for the year of the HBP withdrawal. If Form T2201 is not approved, your withdrawals will not be considered eligible withdrawals under the HBP and they will have to be included in income for the year.

If all other eligibility requirements are met, we consider a person to be entitled to the disability amount even if costs for an attendant or for care in a nursing home were claimed as a medical expense by or on behalf of that person.

Eligible withdrawal - This is an amount you withdraw from your RRSP that meets all HBP conditions that apply to your situation.

HBP balance - When you withdraw funds from your RRSPs under the HBP, you create an HBP balance. Your HBP balance at any time is the total of all eligible withdrawals you made from your RRSPs minus the total of all amounts you designated as an HBP repayment and the amounts included in your income (because they were not repaid to your RRSPs), in previous years.

Participant - You are considered an HBP participant if:

• you make an eligible withdrawal from your RRSP to buy or build a qualifying home for yourself;
• for 1999 and future years, you make an eligible withdrawal from your RRSP under the HBP to buy or build a qualifying home for a related disabled person or to help such a person buy or build a qualifying home; or
• you are the spouse or common-law partner of a deceased HBP participant and you elected to continue making the repayments for the deceased participant.

Participation period - Your HBP participation period starts on January 1 of the year you receive an eligible withdrawal from your RRSP and ends in the year your HBP balance is zero.

Qualifying home - A qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings, all qualify. A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in, a housing unit located in Canada also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

RRSP deduction limit - This refers to the maximum amount you can deduct for contributions you made to your RRSP or to your spouse's or common-law partner's RRSP.

Spouse - You have a spouse when you are legally married. You still have a spouse if you are living apart for reasons other than a breakdown of your relationship.

Chapter 1 - Participating in the HBP

What is the HBP?

The HBP is a program that allows you to withdraw up to $20,000 from your registered retirement savings plans (RRSPs) to buy or build a qualifying home. The home can be for yourself or it can be for a related disabled person if one or both of the following applies:

• it is more accessible to that person than his or her current home; or
• it is better suited to that person's needs.

You can acquire the home for the disabled person, or you can provide the withdrawn funds to the disabled person to acquire the home.

You do not have to include eligible withdrawals in your income, and your RRSP issuer will not withhold tax on these amounts. You can withdraw a single amount or make a series of withdrawals throughout the same year, provided the total of your withdrawals is not more than $20,000. If you buy the qualifying home together with your spouse or common-law partner, or other individuals, each of you can withdraw up to $20,000.

You have to repay all withdrawals to your RRSPs within a period of no more than 15 years. Generally, you will have to repay an amount to your RRSPs each year until you have repaid all the amount you withdrew. If you do not repay the amount due for a year, it will be included in your income for that year.

Can a withdrawal be made from any RRSP?

You can only withdraw funds from an RRSP under which you (the participant) are the annuitant. If your spouse or common-law partner contributed to your RRSP, you are the annuitant of the RRSP, even if your spouse or common-law partner deducted the contributions from taxable income. If you contributed to your spouse's or common-law partner's RRSP, that individual is the annuitant of the RRSP, even if you have deducted the contributions from your income.

Some RRSPs, such as locked-in or group RRSPs, do not allow you to withdraw funds from them. Your RRSP issuer can give you more information about the types of RRSPs that you have and whether or not withdrawals under the HBP can be made from them.

Note
If you withdraw an amount from an RRSP to which you made a contribution during the 89-day period just before your withdrawal, you might not be able to deduct the contribution you made. For more information, see "How do you make an HBP withdrawal?".

What are the conditions for participating in the HBP?

A number of conditions have to be met to participate in the HBP. While some conditions have to be met before you can withdraw funds from your RRSPs, others apply when or after you receive the funds.

If you participate in the HBP, you have to meet all the HBP conditions yourself. However, depending on your situation, some conditions may have to be met by another person. For example, if you withdraw funds from your RRSPs to help a related disabled person buy or build a qualifying home, some conditions have to be met by that person.

Regardless of the situation, you are responsible for making sure that all HBP conditions are met. If at any time during your participation period a condition is not met, your withdrawal will not be considered an eligible withdrawal and it will have to be included in income for the year you received it.

The following chart lists all the HBP conditions and who has to meet them in different situations. We explain each condition in greater detail in the pages that follow the chart.

You have to enter into a written agreement to buy or build a qualifying home

To withdraw funds from your RRSPs under the HBP, you must first have entered into a written agreement to buy or build a qualifying home. Obtaining a preapproved mortgage does not satisfy this condition.

Note
If you are withdrawing funds from your RRSPs to help a related disabled person to buy or build a qualifying home, that person must meet this condition.

When you withdraw funds from your RRSPs under the HBP, you have to intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. Once you occupy the home, there is no minimum period of time that you have to live there.

In some cases, you may not occupy the qualifying home by the end of the 12-month period after you bought or built it. If this happens to you, we still consider you a participant in the HBP because you intended to occupy the home as your principal place of residence no later than one year after buying or building it.

Note
If you are withdrawing funds from your RRSPs to buy or build a qualifying home for a related disabled person or to help a related disabled person to buy or build a qualifying home, that person must meet this condition.

You have to be considered a first-time home buyer

Generally, before you can withdraw funds from your RRSPs to buy or build a qualifying home, you have to meet the first-time home buyer's condition.

You are not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence.

Example 1
You want to participate in the HBP in 2002. To be considered a first-time home buyer, you or your spouse or common-law partner cannot have owned and occupied a home as your principal place of residence at any time during the period beginning January 1, 1998, and ending 31 days before your withdrawal in 2002.

In this section, the word "home" has the same meaning as the term "qualifying home".

Note
You must meet the first-time home buyer's condition at the time you withdraw an amount from your RRSPs under the HBP. If you are not considered a first-time home buyer when you withdraw an amount, that amount will have to be included in your income.

To determine if you are considered a first-time home buyer, complete the following questionnaire:

If at the time of withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer.

Exception to the first-time home buyer's condition -You do not have to meet the first-time home buyer condition to participate in the HBP if any of the following situations applies to you:

• you are a disabled person and you withdraw funds from your RRSPs under the HBP to acquire a home that is more accessible, or better suited to your needs;
• you withdraw funds from your RRSPs under the HBP to acquire a home for a disabled person related to you by blood, marriage, or adoption, that is more accessible to, or better suited to the needs of, that person; or
• you withdraw funds from your RRSPs under the HBP and give those funds to a disabled person related to you by blood, marriage, or adoption, to acquire a home that is more accessible to, or better suited to the needs of, that person.

Your HBP balance on January 1 of the year of withdrawal has to be zero

If you previously participated in the HBP, you may be able to do so again if:

• your HBP balance is zero on January 1 of the year during which you plan on making another HBP withdrawal; and
• you meet all the other HBP conditions that apply to your situation.

Your HBP balance is zero when the total of your designated HBP repayments and the amounts included in your income (because they were not repaid to your RRSPs) in previous years equals the total eligible withdrawals you received.

Neither you nor your spouse or common-law partner can own the qualifying home more than 30 days before the withdrawal

You cannot withdraw an amount from your RRSP under the HBP if you or your spouse or common-law partner owned the home described on Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP, more than 30 days before the date of your withdrawal.

Example 2
Kate buys a qualifying home with a closing date (acquisition date) of November 1, 2001. She must make her final withdrawal under the HBP no later than 30 days after the closing date. Therefore, Kate has until December 1, 2001, to make her last withdrawal under the HBP. If she makes a withdrawal after December 1, 2001, it will not be considered an eligible withdrawal and must be included in her income for the year 2001.

Note
If you are withdrawing funds from your RRSPs to help a related disabled person to buy or build a qualifying home, the disabled person and his or her spouse or common-law partner (if applicable) must meet this condition.

You have to be a resident of Canada

You have to be a resident of Canada when you receive funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built. If you are not sure whether you are a resident or non-resident of Canada, or you need more information about residency status, contact your tax services office.

If you become a non-resident after you receive your funds but before a qualifying home is bought or built, you may cancel your participation in the HBP. For more information, see the section called "Cancelling your participation".

If you become a non-resident after a qualifying home is bought or built, your withdrawal will be considered to be eligible. However, special rules will apply to the repayment of your HBP balance. For more information, see the section called "If you become a non-resident".

You have to complete Form T1036

To make an eligible withdrawal under the HBP, you have to use Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP.

You have to complete Form T1036 for each withdrawal you make. You will find a copy of the form at the end of this guide, or you can complete it in its electronic format on our Internet site, at http://www.ccra.gc.ca/eservices/menu-e.html. You can also order a copy of the form by calling 1-800-959-2221.

You have to receive all withdrawals in the same year

To participate in the HBP, you have to receive all the withdrawals from your RRSPs in the same year. However, if you receive an amount from your RRSP in one year and another in January of the following year, we consider the amount received in January of the following year to have been received in the year the first withdrawal was made.

Note
If you receive a withdrawal of funds in one year and another after January of the following year, the amount received after January will not be an eligible withdrawal under the HBP and you will have to include it in your income.

Example 3
On October 15, 2001, Chloe withdrew $7,500 from her RRSP under the HBP. Before the withdrawal, Chloe had entered into a written agreement to buy a qualifying home. In March 2002, she withdrew an additional $1,500 to pay expenses she had not anticipated. Because Chloe's second withdrawal was received after January 2002, it is not considered an eligible withdrawal and must be included in her income for the year 2002.

You cannot withdraw more than $20,000

You can withdraw up to $20,000 from your RRSPs under the HBP. You can make more than one withdrawal as long as the total of your withdrawals is not more than $20,000. If you buy the qualifying home together with your spouse or common-law partner, or other individuals, each individual can withdraw up to $20,000.

Note
If the total of your RRSP withdrawals under the HBP is more than $20,000, you will have to include the excess amount in your income for the year you receive it. In addition, your RRSP issuer will have to withhold tax on the excess amount when paid.

You have to buy or build the qualifying home before October 1 of the year after the year of withdrawal

Generally, if you participate in the HBP in a particular year, you have to buy or build the qualifying home before October 1 of the year following the year of withdrawal.

We consider you to have bought or built a qualifying home if you bought or built it alone or with one or more individuals. If you are building a qualifying home, we consider you to have built the home on the date it becomes habitable.

Note
If you are withdrawing funds from your RRSPs to help a related disabled person to buy or build a qualifying home, the disabled person must meet this condition.

If you do not buy or build the qualifying home before October 1 of the year after the year of withdrawal, you can:

• cancel your participation in the HBP (for more information, see the section called "Cancelling your participation"); or
• buy or build a different home, called a replacement property, before October 1 of the year following the year of withdrawal.

A replacement property has to meet the same conditions as a qualifying home. You do not have to complete another Form T1036 to advise us that you are buying or building a replacement property. Just send a letter to: Pension and RRSP Processing Group, Ottawa Technology Centre, 875 Heron Road, Ottawa ON K1A 1A2.

Give your name, address, and social insurance number, as well as the address (and phone number, if possible) of the replacement property. Also, you have to certify in the letter that you intend to occupy the replacement property as your principal place of residence no later than one year after you buy or build it.

Note
If you have already withdrawn from your RRSPs the $20,000 maximum allowed under the HBP, you cannot make any more withdrawals to buy or build the replacement property.

Extensions for buying or building a qualifying home or replacement property - If you do not buy or build the qualifying home you indicated on Form T1036 (or a replacement property) before October 1 of the year following the year of withdrawal, we still consider you to have met the deadline if either of the following situations applies to you:

• You had a written agreement, in effect on October 1 of the year following the year of withdrawal, to buy a qualifying home or replacement property, and you buy the property before October 1 of the second year following the year of withdrawal. In addition, you have to be a Canadian resident up to the time of purchase (see Example 4 below).
• You paid before October 1 of the year following the year of withdrawal an amount at least equal to the total of your withdrawals under the HBP to the contractors or suppliers (with whom you deal at arm's length) for materials for the home being built, or towards its construction (see Example 5 here).

Example 4
On February 10, 2002, Steven, a Canadian resident, enters into an agreement to buy a duplex, the ground floor of which he will occupy as his principal place of residence. Because of an existing lease, the possession date is May 4, 2004.

On February 20, 2002, Steven withdraws $15,000 from his RRSPs under the HBP. On May 4, 2004, he takes possession of the duplex and moves in.

Because Steven withdrew his funds in 2002, he has to buy the home before October 1, 2003. Although Steven took possession of the home after this deadline, we consider him to have bought the home by the deadline because he had an agreement in effect on October 1, 2003, he bought the home before October 1, 2004, and he was a Canadian resident when he bought it.

Example 5
In January 2000, Clare withdraws $10,000 from her RRSPs under the HBP. Earlier in the same month, she finalized a contract to have her home built, and paid $2,000 to the contractor. She paid $5,000 when construction started in April 2000, and $6,000 more in August 2001, for a total of $13,000. Clare dealt at arm's length with the contractor.

Construction of the home is not completed until December 15, 2001, because the building materials arrived late. Because Clare withdrew her funds in 2000, she has to have the home built before October 1, 2001. Although construction of the home is not completed until December 15, 2001, we consider Clare's home to have been built by the deadline because the $13,000 she paid towards its construction before this deadline is more than the total amount of her withdrawals ($10,000), and because she dealt at arm's length with the contractor.

How do you make an HBP withdrawal?

You have to complete Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP, for each RRSP withdrawal that you make under the HBP. You will find a copy of the form at the end of this guide, or you can complete it in its electronic format on our Internet site at http://www.ccra.gc.ca/eservices/menu-e.html. You can also order a copy of the form by calling 1-800-959-2221.

After completing Area 1 of Form T1036, give it to your RRSP issuer who will complete Area 2. Your RRSP issuer will not withhold tax from the funds you withdraw if you meet the HBP rules. Your RRSP issuer will send you a T4RSP slip, Statement of Registered Retirement Savings Plan Income, showing the amount you withdrew under the HBP. You have to attach the slip to your tax return.

Your RRSP deduction may be affected by an HBP participation
If you participate in the HBP, certain rules limit your RRSP deduction for contributions you made to your RRSP during the 89-day period just before your withdrawal under the HBP. Under these rules, you may not be able to deduct all or part of the contributions made during that period for any year.

You cannot deduct the amount, if any, by which the total of your contributions to an RRSP during the 89-day period just before your withdrawal from that RRSP, is more than the fair market value of that RRSP after your withdrawal.

The same rules apply if you contributed to your spouse's or common-law partner's RRSP during the 89-day period just before that individual's withdrawal from the same RRSP under the HBP.

You and your spouse or common-law partner can use the chart to determine the part of the contributions you or your spouse or common-law partner made that is not deductible for any year.

You have to file a tax return

Starting in the year you make your first HBP withdrawal, you have to complete and send us a return every year until you have repaid all of your HBP withdrawals or included them in your income. You have to send us a return even if you do not owe any tax. Attach the T4RSP slips your RRSP issuer sends you for your HBP withdrawals.

You have to complete Schedule 7, RRSP Unused Contributions, Transfers, and HBP or LLP Activities (included in your income tax package), and attach it to your return to show your total HBP withdrawals and repayments in the year. This will help both you and us to keep track of them.

Chapter 2 - Repaying your withdrawals

Over a period of no more than 15 years, you have to repay to your RRSPs the amounts you withdrew under the HBP. Generally, in each year of your repayment period, you have to repay 1/15 of the total amount you withdrew until the full amount is repaid to your RRSPs. Your repayment period starts the second year following the year you made your withdrawals.

You will receive a Home Buyers' Plan (HBP) Statement of Account each year on your Notice of Assessment or Reassessment. This statement will show the total HBP withdrawals, the amount you have repaid to date, your HBP balance, and the amount you have to repay the following year.

Note
Even if you declare bankruptcy, you still have to repay to your RRSPs all amounts that you withdrew under the HBP.

How do you make your repayments?

To make a repayment under the HBP, you have to make contributions to your RRSPs in the year the repayment is due or in the first 60 days of the following year. You can contribute the repayments to any of your RRSPs. Once your contribution is made, you have to designate all or part of the contribution as a repayment under the HBP.

To designate your repayment, complete Schedule 7, RRSP Unused Contributions, Transfers, and HBP or LLP Activities (in your tax package), and file it with your return. You have to do this even if you would not otherwise have to file a return for the year.

Contributions you cannot designate - Not all contributions you make to your RRSPs in the repayment year or in the first 60 days of the following year can be designated as a repayment under the HBP. You cannot designate contributions that:

• you make to your spouse's or common-law partner's RRSPs (or that he or she makes to your RRSPs);
• are amounts you transfer directly to your RRSPs from a registered pension plan, deferred profit-sharing plan, registered retirement income fund, the Saskatchewan Pension Plan, or another RRSP;
• are amounts you deducted as a recontribution of an excess qualifying withdrawal that you designated to have a past-service pension adjustment approved;
• are amounts that you designate as a repayment under the Lifelong Learning Plan (LLP) for the year;
• are amounts you contribute in the first 60 days of the repayment year, that you deducted on your return for the previous year, or designated as a repayment for the previous year under the HBP or the LLP; or
• are amounts you receive in the year, such as retiring allowances, that you transfer to your RRSPs and deduct or will deduct on your return for that year.

Note
If you do not have an RRSP deduction limit for the repayment year, you can still contribute to your RRSPs and designate the amount you contribute as a repayment under the HBP. We do not consider an amount you designate as a repayment under the HBP to be an RRSP contribution. Therefore, you cannot claim a deduction for this amount on your return.

Example 6
In 1999, Robert withdraws $6,000 from his RRSPs to participate in the HBP. Robert's repayment for 2001 is $400 ($6,000 ÷ 15).

In 2001, Robert contributes $8,200 to his RRSPs. Robert could deduct the full amount on his 2001 return because his Notice of Assessment shows that he has an RRSP deduction limit of $11,000 for 2001.

Robert files Schedule 7 with his 2001 return and designates $400 of the total $8,200 he contributed to his RRSPs as a repayment under the HBP. Robert can deduct, on line 208 of his 2001 return, only $7,800 of the contributions made to his RRSPs because we do not consider the $400 he designates as a repayment under the HBP to be an RRSP contribution.

What happens if you choose to begin your repayments earlier?

You can choose to begin your repayments earlier, but your repayment period will remain the same. Any repayments made before you are required to start your repayments will reduce the actual amount you have to repay in the first year of your repayment period.

What happens if you repay more than the amount you have to repay?

If you repay and designate more than you have to repay, the HBP balance you have to repay to your RRSPs for later years is reduced.

The annual Home Buyers' Plan (HBP) Statement of Account that we send you on your Notice of Assessment or Reassessment takes into account any additional payments you make and gives you the repayment amount for the next year.

If you want to calculate the minimum amount you have to repay for the next year, divide your HBP balance by the number of years remaining in your repayment period.

Example 7
In 1999, Suzanne withdraws $16,500 from her RRSPs to participate in the HBP. Her repayment for 2001 is $1,100 ($16,500 ÷ 15). Suzanne makes the repayment for 2001, and for 2002 and 2003. In 2004, Suzanne receives an inheritance and decides to contribute $8,000 to her RRSPs and designate that amount as a repayment under the HBP for the year 2004. She calculates the amount she has to repay for the year 2005, using the chart below.

What happens if you repay less than the amount you have to repay?

If you repay and designate less than the amount you have to repay, you have to include the difference on line 129 of your return. The amount you include on line 129 is the amount you have to repay for the year, minus the amount you repay and designate. You cannot include in income an amount that is more than the result of this calculation.

Situations where the repayments have to be made in less than 15 years

Additional repayment rules apply if an HBP participant:

• dies;
• becomes a non-resident; or
• is 70 years of age or over.

If the participant dies

General rule - If an HBP participant dies, the legal representative has to include the participant's HBP balance in the participant's income for the year of death.

The amount to be included in a deceased participant's income for the year of death is equal to the participant's HBP balance before death less any RRSP contributions (made before the participant died) designated as an HBP repayment for the year of death.

Example 8
John dies in 2004. At the time of death, his HBP balance was $7,000. He had made a $1,000 RRSP contribution before he died, which he intended to designate as an HBP repayment for 2004. John's legal representative has to include $6,000 ($7,000 - $1,000) as income on line 129 of John's final return for 2004.

HBP election - If, at the time of death, the participant had a spouse or common-law partner who is a resident of Canada, that individual can elect jointly with the deceased's legal representative, to make the repayments under the HBP and to not have the income inclusion rule apply for the deceased participant. The participant's HBP balance at the time of death less any RRSP contributions designated as an HBP repayment for the year of death is treated as if the surviving spouse or common-law partner withdrew it, and it has to be repaid to that individual's RRSPs.

Note
If, in the year of death but before the participant dies, the surviving spouse or common-law partner became a participant, that individual may still withdraw amounts under the HBP (up to $20,000) from his or her RRSPs in the year. There are no adverse tax consequences to the surviving spouse or common-law partner if, as a result of electing to treat the deceased's HBP balance as his or her own, the new HBP balance exceeds $20,000.

For deaths that occur after 1998, if at the time of death the participant's surviving spouse or common-law partner is also a participant and the election described above is made, the surviving spouse's or common-law partner's revised HBP balance has to be repaid over the remaining number of years in his or her repayment period.

However, if the surviving spouse or common-law partner was not a participant, the deceased participant's HBP balance has to be repaid over the same number of years remaining in the deceased's participation period.

To make a joint election, the surviving spouse or common-law partner and the deceased's legal representative should sign a letter and attach it to the deceased's return for the year of death. The letter should state that an election is being made to have the surviving spouse or common-law partner continue making repayments under the HBP, and to not have the income inclusion rule apply for the deceased.

Generally, if the surviving spouse or common-law partner who was not participating in the HBP elects to continue making the repayments for the deceased individual, the surviving spouse or common-law partner is considered a participant and cannot make a withdrawal from any RRSP under the HBP until the HBP balance is completely repaid.

Note
If an election is made and the deceased had not made a repayment for the year of death, no repayment will be required for that year for the deceased.

Example 9
Ron dies June 10, 2002. At the time of death, Ron is a participant in the HBP but his common-law partner, Joanne, is not. At the time of death, Ron has an HBP balance of $5,000. Unless Joanne elects to make Ron's HBP repayments, the $5,000 HBP balance will have to be included on Ron's 2002 return.

Joanne, who is the legal representative of the estate, decides to repay Ron's HBP balance. She attaches a letter to Ron's 2002 return to elect to repay Ron's HBP balance and to not have the income inclusion rules apply for Ron. Joanne will continue making the repayments to her RRSPs following Ron's repayment period.

As a result of making the election, Joanne is now considered a participant. She cannot make an HBP withdrawal from her RRSPs until the HBP balance has been completely repaid.

Example 10
Gert and David are married. In 2001, they each withdraw $20,000 from their respective RRSPs to participate in the HBP. The repayment period for both Gert and David is from 2003 to 2017.

On December 7, 2007, Gert dies. At that point, she still had $12,000 of her total withdrawal left to repay. She had not made her repayment for 2007.

David, who is the legal representative of the estate, attaches a letter to Gert's final return to state that he is electing to repay her $12,000 HBP balance to his RRSPs. As a result of making the election, the unpaid balance of $12,000 does not have to be included in Gert's income for 2007 and a repayment for Gert for the year of death does not have to be made.

When Gert died, David had made his repayment for 2007. His balance to be repaid is $10,000. Gert's unpaid balance of $12,000 is added to David's $10,000, and he will have to repay $22,000 over the next 10 years (2008 to 2017, inclusive). In 2008, he has to repay $2,200, determined as ($10,000 + $12,000) ÷ 10 years.

If you become a non-resident

You may cease to be a resident of Canada after a qualifying home is bought or built. If this is the case, you have to repay the balance of the funds you withdrew under the HBP before the date you file your return for the year, or no later than 60 days after you cease to be a Canadian resident, whichever date is earlier. If you do not make the repayment by this deadline, you have to include the amount that you have not repaid in your income for the year that you became a non-resident. The amount is included in income for the period you were resident in Canada.

Example 11
In 2000, Jeannie withdraws $10,000 from her RRSPs under the HBP to buy a qualifying home. On November 10, 2004, she leaves Canada to live in France. At that time, her unpaid HBP balance is $4,000.

Jeannie has 60 days after becoming a non-resident, that is, until January 9, 2005, to repay the balance. She contributes $2,500 to her RRSPs on December 2, 2004, and $1,000 to her RRSPs on January 7, 2005, for a total contribution of $3,500. Jeannie completes and files Schedule 7 with her 2004 return to designate this contribution as a repayment under the HBP. Because she has not repaid the full amount, Jeannie has to include $500 in her 2004 income, calculated as $4,000 - ($2,500 + $1,000).

If you are 70 years of age or over

After the end of the year you reach the age of 69, you will not be able to repay your withdrawals made under the HBP. This is because you cannot contribute to an RRSP after the end of the year you reach the age of 69.

In the year you reach the age of 69, you can choose to repay all or part of your HBP balance. If you do not repay your entire HBP balance, you have to include in your income, for each later year, the amount that would be your annual repayment as it becomes due.

Example 12
In 2001, Mary withdraws $18,000 from her RRSPs to participate in the HBP. In 2005, Mary reaches the age of 69.

Mary repays the amount of $1,200 for 2003 and 2004, and at the beginning of 2005 has an HBP balance of $15,600 to repay to her RRSPs. Because Mary reaches the age of 69 in 2005, this is the last year she can contribute to her RRSPs.

Mary has to decide how much of the $15,600 to repay to her RRSPs in 2005. Mary decides to contribute $10,000 to her RRSPs and to designate that amount as a repayment under the HBP. This leaves her with an unpaid balance of $5,600 at the end of 2005. Mary will have to include $466.67 ($5,600 ÷ 12 = $466.67) in income for each year from 2006 to 2017.

If Mary did not repay any part of the $15,600, she would have to include $1,200 in income each year from 2005 to 2017. If Mary repaid the entire $15,600, she would not have to include any part of this amount in her income.

Chapter 3 - Other rules you should know

What happens if you do not meet all the HBP conditions?

If you do not meet all the HBP conditions, your RRSP withdrawals will not be considered eligible and will have to be included in income for the year you received them. If we have already assessed your return for that year, we will reassess it to include the withdrawals.

Cancelling your participation

You can cancel your participation in the HBP if you have met all but one of the following HBP conditions:

• you did not buy or build a qualifying home or replacement property; or
• you became a non-resident before buying or building a qualifying home or a replacement property.

If either of these situations applies to you, complete the cancellation form on page 13 of this guide.

You can also do it if you gave the funds you withdrew under the HBP to a related disabled person to acquire a home, and:

• that person does not buy or build a qualifying home or replacement property; or
• you become a non-resident before that person buys or builds a qualifying home or a replacement property.

Note
If you make a withdrawal from your RRSP that meets all applicable HBP conditions, you cannot cancel your participation.

If you repay to your RRSPs the full amount you withdrew under the HBP, you will not be taxed on your withdrawal. Any portion of your withdrawal that is not repaid will have to be included in your income for the year you received the funds.

You can make your cancellation payments to any of your RRSPs or to a new RRSP, with any issuer.

Due date for making cancellation payments - If you cancel your participation because a qualifying home or replacement property was not bought or built, your cancellation payments are due on or before December 31 of the year after the year you received the funds.

If you cancel your participation because you became a non-resident before a qualifying home or replacement property was bought or built, your due date will depend on when you became a non-resident. If you were a non-resident at the time you filed a return for the year you received the funds, your cancellation payments are due on or before the earlier of the following two dates:

• December 31 of the year after the year you received the funds; or
• the day you filed a return for the year you received the funds.

In all other situations, your cancellation payments are due on or before December 31 of the year after the year you received the funds.

How to cancel your participation - To cancel your participation, you have to complete the form provided on the next page. Send us the completed form and the official RRSP contribution receipt your RRSP issuer gave you on or before the cancellation payment due date that applies to you.

Example 13
Jason and his spouse, Karen, each complete Form T1036 on April 10, 2002, to withdraw amounts from their RRSPs under the HBP. Jason withdraws $12,000 from his RRSPs and Karen withdraws $14,000 from her RRSPs. They had entered into a written agreement on March 20, 2002, to buy a qualifying home on September 12, 2002.

In August 2002, Jason and Karen decide not to buy the home and to cancel their participation in the HBP. Jason repays $12,000 to one of his RRSPs. He completes the cancellation form and sends it to us with his official RRSP receipt on or before December 31, 2003.

Karen also completes and sends us the cancellation form with her official RRSP receipt before 2004, but she decides to keep $6,000 of the withdrawn funds and repays only $8,000 to her RRSP. Karen has to report $6,000 as income on her 2002 return, because she did not repay these funds to her RRSP.

If you cannot participate in the year, can you participate in a later year?

If you cannot participate in the HBP in a year, because you do not meet the first-time home buyer's condition or because your HBP balance was not zero on January 1 of the

year you want your participation period to start, you may be able to participate in the HBP in a later year.

First-time home buyer - If, during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal, neither you nor your spouse or common-law partner owned a home that you occupied as your principal place of residence, you may be able to participate in the HBP. For example, if in 1996, you sold the home you previously lived in, you may be able to participate in 2001, or if you sold the home in 1997, you may be able to participate in 2002.

HBP balance - If you participated in the HBP in a previous year, you can do so again if your HBP balance on January 1 of the year in which you want your new participation to begin is zero, and you meet all the other HBP conditions that apply to your situation.

For example, you withdraw funds from your RRSPs under the HBP in 1997. Your repayment period is from 1999 to 2013. If you repay the funds you withdrew over the full 15-year repayment period, you may be able to participate in the HBP again in 2014. If you completed repaying the funds in 2006, you may be able to participate in the HBP again in 2007.

Note
If you repay the remainder of your HBP balance owing by designating an RRSP contribution made in the first 60 days of the following year, we consider your HBP balance to be zero on January 1 of the year in which the contribution was made.

Can you use funds withdrawn under the HBP for other purposes?

As long as you buy or build a qualifying home and meet all the conditions to participate in the HBP, you can use the funds you withdrew under the HBP for any purpose.

Can you participate in the Lifelong Learning Plan (LLP) at the same time?

You can participate in the HBP even if you have withdrawn funds from your RRSPs under the LLP that you have not yet fully repaid. For more information about the LLP, get the guide called Lifelong Learning Plan (LLP).