March 1, 2022 is the deadline for contributing to an RRSP for the 2021 tax year, and it’s just around the corner.
Did you know an RRSP is a great way to top up your down payment for a new home?
The Home Buyers’ Plan can be used as a tool to maximize your tax refund. It allows first-time home buyers, people who have not owned a home in the past four years, to withdraw money from their RRSPs to purchase a primary residence. A maximum of $35,000 can be withdrawn from an RRSP. If you are married or purchasing a home with another first-time home buyer, each person can withdraw up to a maximum of $35,000 from their RRSP’s for a combined total of $70,000.
If you have money in a savings account, the money can be transferred into an RRSP account, as long as the contribution room is available. Find out your contribution limit on your latest notice of assessment or notice of reassessment by logging into your Canada Revenue Agency (CRA) account online or calling the CRA at 1 800-267-6999.
The RRSP can be withdrawn 90 days later under the Home Buyers’ Plan and used as a down payment on a home. This year, you will receive a tax refund to top up your down payment when you file your taxes.
IMPORTANT TO NOTE: If you plan to purchase a home within the next 90 days, this plan will not work for you. Your money must be in an RRSP for 90 days to withdraw under The Home Buyers’ Plan.
You have 15 years to repay your RRSPs. The repayment period starts the second year after the funds were withdrawn.
Contact me today to develop a strategy that will work best for you and your situation. Chat with your financial planner and accountant if you are unsure about contributing to an RRSP.