# RRSP and HBP question



## rivet (Nov 30, 2012)

Hi, 

I am looking to purchase my first home very soon. I am thinking of taking advantage of the HBP program to increase my cash flow to reduce the payment on interests. 

Basically, my question is, if I contribute to RRSP 25000 now and withdraw it after 90 days and buy my first home at around the same time and claim the RRSP deduction and HBP withdraw at the same time when I file my tax return for 2013?

Or do I need to claim the RRSP deduction first and can only withdraw next year after the tax deduction to use HBP?


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## stardancer (Apr 26, 2009)

The contribution gets reported on your 2013 tax return. You will receive a T4A for the HBP withdrawal which must be attached to your return, but the $25,000 (or whatever) is not counted towards your taxable income.


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## rivet (Nov 30, 2012)

A follow up question, can I contribute but not deduct my 25000 RRSP contribution for 2013 tax year, but deduct them gradually in later tax years (assuming I may be in a higher tax bracket in later years) and still participate in Home buyer program that withdraw funds in 2013?


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## stardancer (Apr 26, 2009)

rivet said:


> A follow up question, can I contribute but not deduct my 25000 RRSP contribution for 2013 tax year, but deduct them gradually in later tax years (assuming I may be in a higher tax bracket in later years) and still participate in Home buyer program that withdraw funds in 2013?


I am assuming you have the full $25,000 contribution room for 2013; yes you can contribute, then deduct the amount gradually or all at once, in whatever amounts you can, within the limits that show on your notice of assessments. Keep a close eye on the amounts so you don't over-contribute in future years.

As long as you have the funds in your RSP and you have met the 90-day limit, you can withdraw for the HBP; note, in future you must actually deposit the repayment into your RSP in cash to declare the repayment on schedule 7; you cannot use the unused contribution room to pay back the HBP; if you do not contribute the actual cash, the repayment amount becomes taxable income.


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## Guban (Jul 5, 2011)

stardancer said:


> in future you must actually deposit the repayment into your RSP in cash to declare the repayment on schedule 7; you cannot use the unused contribution room to pay back the HBP; if you do not contribute the actual cash, the repayment amount becomes taxable income.


Sounds like a very small difference. If the repayment amount becomes taxable income, then the unused RRSP contribution can be used to offset it. Income tax result should be the same. May change other credits I suppose (CTB, GST).


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