Saving the down payment for a home can be a challenge for many first-time home buyers.
The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw up to $20,000 from a Registered Retirement Savings Plan (RRSP) to purchase or build a home. Unlike regular RRSP withdrawals, HBP withdrawals are not included in income when withdrawn. Amounts withdrawn under the HBP must be repaid over a 15-year period, starting the second year following the year of the withdrawal, or included in the individual’s income if not repaid.
To provide first-time home buyers with additional access to their RRSP savings to purchase or build a home, Budget 2009 proposes to increase the HBP withdrawal limit to $25,000 from $20,000 in respect of withdrawals made after January 27, 2009. It is also proposed that the increase apply to HBP withdrawals made for the purchase of a more accessible or functional home where the individual making the withdrawal is eligible for the Disability Tax Credit (DTC), or if the withdrawal is made for the benefit of a DTC-eligible person who is related to the individual making the withdrawal. This is the first increase in the withdrawal limit since the HBP was introduced in 1992.
With the $5,000 increase to the withdrawal limit, two first-time home buyers purchasing a home jointly (e.g. a married or common-law couple) with sufficient RRSP funds in each of their names may now together withdraw up to $50,000 from their RRSP funds toward the purchase of a home in Canada. It is estimated that this measure will cost $15 million in each of 2009–10 and 2010–11.
First-Time Home Buyers’ Tax Credit
The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time home buyers, who must pay these costs on top of saving the money for a down payment.
To assist first-time home buyers with the costs associated with the purchase of a home, Budget 2009 proposes to introduce a First-Time Home Buyers’ Tax Credit — a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.
It is also proposed that the First-Time Home Buyers’ Tax Credit be made available to existing homeowners in respect of a more accessible or functional home purchased by an individual eligible for the Disability Tax Credit (DTC), or for the benefit of a DTC-eligible person who is related to the individual purchasing the home.
It is estimated that this measure will cost $30 million in 2008–09, $175 million in 2009–10 and $180 million in 2010–11.
Source http://www.budget.gc.ca/2009/plan/bpc3c-eng.asp
Ekatarina Erchova
www.quebec-real-estate.com
