# Is this allowed with RRSP/HBP?



## peterk (May 16, 2010)

Can I:

1) Deposit 25k into RRSP in 2013.
2) Not claim it as a deduction in Spring 2014 (2013 tax year).
3) Buy a house with the HBP withdrawl in 2014.
4) Claim the 25k as a deduction in Spring 2015 (2014 tax year)

5) Carry on with regular RRSP contributions (and paying back the HBP portion of the contribution) in 2015

?

I'm assuming this is OK, as otherwise I'd be losing contribution room. I just want to make sure I can buy the house in the year before I make the deduction...


----------



## nobleea (Oct 11, 2013)

peterk said:


> Can I:
> 
> 1) Deposit 25k into RRSP in 2013.
> 2) Not claim it as a deduction in Spring 2014 (2013 tax year).
> ...


I'm pretty sure you have to claim it before you can withdraw it under HBP. So the steps would be 1, 4, 3, 5.


----------



## alingva (Aug 17, 2013)

Rule is simple, money has to be in RRSP for 90 days. You claim RRSP when you want even in 30 years


----------



## rivet (Nov 30, 2012)

Can any one else confirm. I also plan to put some money in RRSP for HBP withdraw but not planning to claim the deduction for another 2 to 3 years.


----------



## OptsyEagle (Nov 29, 2009)

There is no deduction deadline. Claim it when you want, use it for HBP as long as it has been in the RRSP for at least 90 days.


----------



## peterk (May 16, 2010)

From my reading I can't find anything that says this is disallowed. I think OptsyEagle and alingva are correct.
Thanks guys!

nobleea, do you have info that says otherwise?


----------



## aB01 (Sep 11, 2013)

I'm confused as to why you would do this. Seems like a lot of hassle for little gain.

So you put 25k into RRSP, wait 90 days. Have 25k unclaimed RRSP.
Take the money out for HBP, but a house. Have a 25k HBP balance.
Claim the 25k against the HBP, so no deductions.
At the end, your RRSP is at 0 (+some interest), that 25k essentially went straight to the house down payment.

Other than the tax on the interest gained, the only thing I can think of is you are in a low bracket now, and expect to get a raise.
But then why not just skip the RRSP and contribute later?

What am I missing?


----------



## Eclectic12 (Oct 20, 2010)

aB01 said:


> I'm confused as to why you would do this. Seems like a lot of hassle for little gain.
> 
> ... Claim the 25k against the HBP, so no deductions.
> At the end, your RRSP is at 0 (+some interest), that 25k essentially went straight to the house down payment ...
> Other than the tax on the interest gained, the only thing I can think of is you are in a low bracket now, and expect to get a raise ...


From what's upthread - the OP does plan to claim the tax deduction but would prefer to claim it against 2014 tax year income.

So the net result is going to be:

That the $25K went into the RRSP for 90+ days will be withdrawn to buy the house, leaving the RRSP value at a small amount.

The $25K RRSP deduction will be used partly or in whole against 2014 tax year income - generating a refund. Like you, I suspect the likely reason for delaying claiming the RRSP deduction is due to an expected higher income (plus possibly a higher tax level).

There will be a $25K HBP amount to pay back into the RRSP, I believe starting 2 years after the home purchase, to be repaid over 15 years.




aB01 said:


> ... But then why not just skip the RRSP and contribute later?


 ... likely because this way allows the money allocated to buy the house to generate a tax refund in a relatively short time frame.

Skipping the HBP means that a future $25K RRSP contribution is going to have to come from some other income, instead of money that already available.


The trade off here is that where the OP is paying back the HBP, spare cash equal to a minimum of $25K / 15, or approximately $1.6K is going to be needed to handle re-paying the RRSP.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

wendi1 said:


> aB01:
> 
> You get the tax refund for the 25K in the year that you make the contribution ...


Close ... but not quite true.

One gets the tax refund in the tax year that the RRSP contribution is claimed, where all the relevant factors add up to less tax being owed than had already been deducted.

Part of the RRSP rules is that the contribution is claimed in the tax year it is made but the tax deduction can delayed until a future tax year. This is why if one looks at the tax forms, schedule 7 "RRSP Unused Contributions, Transfers, and HBP or LLP Activites" - there are three sections.

Part A is Contributions (both carried forward amounts and current year contributions), Part B are Repayments under the HBP or LLP, Part C are RRSP Deduction for this tax year and Part D is RRSP unused contributions available to carry forward.

So for one tax year, my schedule 7 had Part A $0 carry forward + $5K current contributions, Part B $0, Part C $2K and Part D $3K.
The next tax year, my schedule 7 had Part A $3K carry forward + $0 current contributions, Part B $0, Part C $2K and Part D $1K.


Cheers


----------



## aB01 (Sep 11, 2013)

aB01 said:


> Claim the 25k against the HBP, so no deductions.


That was where I missed something, claim the contribution for the refund in 2014, and pay the HBP later.
Thanks


----------



## peterk (May 16, 2010)

To clarify the reason: If I buy a house next year, my company will give me a sizable bonus towards a downpayment. My 2014 income would be substantially higher than either my 2013 or 2015 income due to this. 

I suppose I don't NEED to use my RRSP prior to the house purchase, but my TFSA is almost maxed and it doesn't really make sense to not use it for continued savings towards the downpayment over the next year or 2. I'd have tax owing if I used an unregistered account, afterall. Plus, I had some money in my RRSP before I started thinking about all this house stuff, so it's already stuck in there anyways...

Thanks guys!


----------

