# Should we pay back the HBP if one spuse isnt working?



## Kyle715 (Feb 8, 2017)

My wife and I both withdrew the maximum $25,000 from our RRSP using the HBP. At the time we were both working and had of course planned to repay the min amount each year given our dual incomes at the time. With a few additions to our family we have decided that my wife will be staying home with the kids. Given that she won’t have any substantial income, does it still make sense to repay her annual min amount. Would we not be better off for me to claim the tax deduction against my income?


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## balexis (Apr 4, 2009)

If your wife is not repaying her HBP minimum amount, this will cause the corresponding amount to be added to her taxable income, not create some tax deduction against *your* income.

Its similar to if she was just withdrawing that amount from her RRSP. It might actually make sense not only to skip HBP repayments, but also withdraw an additional amount from her RRSP while she has low/no income (and move it to her TFSA). More calculations are needed from your side to determine the optimal numbers, depending on how much she as in her RRSP/TFSA, etc.


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## Eclectic12 (Oct 20, 2010)

Kyle715 said:


> My wife and I both withdrew the maximum $25,000 from our RRSP using the HBP ... Given that she won’t have any substantial income, does it still make sense to repay her annual min amount. Would we not be better off for me to claim the tax deduction against my income?


There seems to be two issues here.

The first is whatever she does for HBP repayments affects her tax return ... not yours.

The second is that where she skips repaying the minimum HBP repayment, she will have to report that amount as income on her tax return. There is no RRSP deduction at play here as the repayment is putting back $$$ that were granted an RRSP deduction when the original contribution was made.


Claiming the repayment amount (or a bit more) as income might make sense if there's a big difference in tax rates ... but I suspect one needs to make sure that the additional income won't change any of the benefits received.


Cheers


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## Kyle715 (Feb 8, 2017)

Eclectic12 said:


> The first is whatever she does for HBP repayments affects her tax return ... not yours.


In our situation, with me being the sole bread winner, her repayments come from my income. So, if I choose to simply take the tax deduction on the $1666 rather than allocate it to her HBP repayment would she not show $1666 income (well under the basic persona amount) and I would revive the deduction on my income.


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## OptsyEagle (Nov 29, 2009)

That is correct. 

Also, keep in mind that what she does on her tax return DOES effect your tax return. When a spouse is in a low (less then $11,500 annually) to zero income bracket, the working spouse is given a spousal tax credit. This credit is reduced, dollar for dollar by her taxable income. In other words, if you wife declares $1,666 of income, and it is the only income she has, she will not pay any income taxes. YOU however will lose $1,666 of a spousal tax credit costing you an additional $333 in taxes payable (approx.), on your return.


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## Eclectic12 (Oct 20, 2010)

Kyle715 said:


> ... if I choose to simply take the tax deduction on the $1666 rather than allocate it to her HBP repayment would she not show $1666 income (well under the basic persona amount) and I would revive the deduction on my income.


If I have it correct ... the more complete picture is that $1666 can be used to make her HBP repayment or new RRSP contributions that would make an RRSP deduction available.

As long as the $1666 goes into your RRSP or a spousal RRSP - my understanding is there will be an RRSP deduction from your income, in addition to her reporting $1666 of income on her tax return (plus any other sources of income).


Cheers


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## Kyle715 (Feb 8, 2017)

Thanks!:redface-new:


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