Question about repay Home Buyer Plan RRSP

[LoveRFD]

I'm wondering if I repaid say $500 to the money I borrowed from RRSP when I first bought my house, how would CRA know that the $500 RRSP I bought was for repay not new contribution? TIA.

[Wiseman]

You would file it on your income tax, I believe on the schedule 7 sheet.

[LoveRFD]

You would file it on your income tax, I believe on the schedule 7 sheet.

Thanks for your quick reply. I didn't see that schedule 7 sheet in Studio Tax software, anybody knows if it's in there? Or should I buy other software like ufile to be able to file schedule 7?

[LoveRFD]

Never mind, I find the solution in Studio Tax.

[dutchca]

There is really no benefit to repaying the amount you borrowed quicker than the 15 year maximum. The only thing it does is reduce your current year RRSP contribution.

If your minimum is $500, by al means - but if it is less, only claim the min. repayment IMO.

[webworm]

Your forgetting that the longer you take to repay those funds back into your RRSP that you are also losing out on the interest compounding of those funds.

[seshwan]

Your forgetting that the longer you take to repay those funds back into your RRSP that you are also losing out on the interest compounding of those funds.

He didn't forget that, just telling you not to repay the whole amount for the HBP, but to repay the minimum and claim anything over that as a contribution.

[pogs]

He didn't forget that, just telling you not to repay the whole amount for the HBP, but to repay the minimum and claim anything over that as a contribution.

sorry, were you saying something...nice avatar. :cheesygri

[knapper]

He didn't forget that, just telling you not to repay the whole amount for the HBP, but to repay the minimum and claim anything over that as a contribution.

If your income is growing and there is a likelihood that you will move up tax brackets, you are better of maxing out the repayment now so that the later payments go against the higher tax rates.

[nuch]

Does the repayments work the same way as a contribution..

i.e. you can only repay a maximum amount every year?

Further example.

If I withdraw 20K from my RRSP on the HBP, can I repay 10K the first year back into my RRSP, thus only owing another 10K?

(hope I didn't confuse anyone)

[sslinn]

Absolutely!! You can pay as much or as little back as you want, it is your money. Small consequences for not paying the minimum back.

You have a two year grace period where you don't have to pay any back. After that you are required to pay back 1/15th of what you took out. Any portion of the 1/15th you don't pay back you will be taxed on.

[nuch]

Absolutely!! You can pay as much or as little back as you want, it is your money. Small consequences for not paying the minimum back.

You have a two year grace period where you don't have to pay any back. After that you are required to pay back 1/15th of what you took out. Any portion of the 1/15th you don't pay back you will be taxed on.

If I pay say 5/15th right off the bat in the first 2 years, does that mean I do not have to contribute for the next 3 years after that? (since I have 5/15th paid up already?)

Thanks for clarifying this process.

[sslinn]

I am not sure of that, but if you have the room you could pay back the 5/15ths and only claim 1/15th per year if you have the room for the over contribution. Here is a link to the CCRA guide:

http://www.mortgagewyse.ca/download/hbpbooklet.pdf

This should answer all of your questions.

[EchoAngel911]

http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/hbp/menu-e.html

straight from the government

[dolphie]

Thanks for your quick reply. I didn't see that schedule 7 sheet in Studio Tax software, anybody knows if it's in there? Or should I buy other software like ufile to be able to file schedule 7?
figured i'd hijack this thread.
i'm using quicktax and can't seem to find the option for 'schedule 7' or hbp replayment either.
How/where the heck do i enter this on quick tax web, anyone know?

[MoreFrugalThanYou]

Does the repayments work the same way as a contribution..

i.e. you can only repay a maximum amount every year?

Further example.

If I withdraw 20K from my RRSP on the HBP, can I repay 10K the first year back into my RRSP, thus only owing another 10K?

(hope I didn't confuse anyone)

You probably have the same thinking as me. :cheesygri

If you have the extra cash lying around, now seems to be a great time to repay a good chunk of your HBP balance off. Some great bargains to be had to pick up some quality mutual funds at the current "low" prices. Best thing to do is to DCA your 10k on purchases over the next few months.

MoreFrugalThanYou

[major]

figured i'd hijack this thread.
i'm using quicktax and can't seem to find the option for 'schedule 7' or hbp replayment either.
How/where the heck do i enter this on quick tax web, anyone know?

Schedule 7 - RRSP Unused Contributions, Transfers, and HBP or LLP Activities. See LINE 246 to enter the amount of your current year RRSP contribution that you want to designate as repayment of the HBP.

I am using the QuickTax software, but I would assume that the QuickTax Web will also have the identical format and forms. Is there a search for forms function?

[dolphie]

Schedule 7 - RRSP Unused Contributions, Transfers, and HBP or LLP Activities. See LINE 246 to enter the amount of your current year RRSP contribution that you want to designate as repayment of the HBP.
i got this part, but how?
when it asks me if i have rrsp's i say yes, and it tells me to enter how much. i can't figure out how to bring up the actual 'schedule' to enter the HBP repayment.
any takers?
tia :)

[dutchca]

You probably have the same thinking as me. :cheesygri

If you have the extra cash lying around, now seems to be a great time to repay a good chunk of your HBP balance off. Some great bargains to be had to pick up some quality mutual funds at the current "low" prices. Best thing to do is to DCA your 10k on purchases over the next few months.

MoreFrugalThanYou

Never pay more than your 1/15 back in a year (this is not the same as just contributing)- there is absolutely no tax advantage to claiming a higher pay-back than your 1/15 of the amount you borrowed - it is actually a disadvantage. It is the same as putting a big lump-sum in your RRSP and not deducting any of it.

If your pay back amount is $500 per year and you only put in $500 you have to claim that as your HBP payment amount. But, if your pay back amount is $500 and you put in $10000, you can still claim $9500 as a deduction in the current year. It would be 100% assisinine to claim the $10000 as a lump sum repayment of your HBP as you would not get to deduct any of it in the current year. There is no tax bonus for paying your HBP amount back quicker than 15 years.

Hopefully you all get it now.

[nuch]

Never pay more than your 1/15 back in a year (this is not the same as just contributing)- there is absolutely no tax advantage to claiming a higher pay-back than your 1/15 of the amount you borrowed - it is actually a disadvantage. It is the same as putting a big lump-sum in your RRSP and not deducting any of it.

If your pay back amount is $500 per year and you only put in $500 you have to claim that as your HBP payment amount. But, if your pay back amount is $500 and you put in $10000, you can still claim $9500 as a deduction in the current year. It would be 100% assisinine to claim the $10000 as a lump sum repayment of your HBP as you would not get to deduct any of it in the current year. There is no tax bonus for paying your HBP amount back quicker than 15 years.

Hopefully you all get it now.

Did a little more reading and figured out just what you explained above.
Thanks for the great advice.

I just bought my house in '07, so I do not have to start paying back till '09 (as I understand it)
So 1/15th is all I will be putting towards the HBP in '09, the remaining today and next year will be all deductions.

[MoreFrugalThanYou]

Never pay more than your 1/15 back in a year (this is not the same as just contributing)- there is absolutely no tax advantage to claiming a higher pay-back than your 1/15 of the amount you borrowed - it is actually a disadvantage. It is the same as putting a big lump-sum in your RRSP and not deducting any of it.

If your pay back amount is $500 per year and you only put in $500 you have to claim that as your HBP payment amount. But, if your pay back amount is $500 and you put in $10000, you can still claim $9500 as a deduction in the current year. It would be 100% assisinine to claim the $10000 as a lump sum repayment of your HBP as you would not get to deduct any of it in the current year. There is no tax bonus for paying your HBP amount back quicker than 15 years.

Hopefully you all get it now.

My mistake.
Let me clarify my response since I thought we were talking about using the 10k strictly for HBP repayment purposes
and not as a source for new RRSP contributions.

"If you have the extra cash lying around (after maxing out your RRSP contribution room),
now seems to be a great time to repay a good chunk of your HBP balance off."

Consider this scenario:

Option 1: repay $20k asap

Year 1 - $20,000


Option 2: repay $20k/15 = $1333.33/yr for next 15 years

Year 1 - $1333.33
Year 2 - $1333.33
Year 3 - $1333.33
...
Year 15 - $1333.33

Assume you retire in 30yrs with an avg return rate of 10% for the above options compounded tax-free, Option 1 should be miles ahead of Option 2.

Then again the key being "if you have the extra cash". ;)

[96civichatch]

How do you do it using STUDIOTAX?


Never mind, I find the solution in Studio Tax.

[LoveRFD]

How do you do it using STUDIOTAX?

I replied your pm. It's in the Schedule7 part B.

[mr_raider]

Never pay more than your 1/15 back in a year (this is not the same as just contributing)- there is absolutely no tax advantage to claiming a higher pay-back than your 1/15 of the amount you borrowed - it is actually a disadvantage. It is the same as putting a big lump-sum in your RRSP and not deducting any of it.

If your pay back amount is $500 per year and you only put in $500 you have to claim that as your HBP payment amount. But, if your pay back amount is $500 and you put in $10000, you can still claim $9500 as a deduction in the current year. It would be 100% assisinine to claim the $10000 as a lump sum repayment of your HBP as you would not get to deduct any of it in the current year. There is no tax bonus for paying your HBP amount back quicker than 15 years.

Hopefully you all get it now.

This argument only applies if you contribute less than your max. If you contribute more than your max amount, and want to quickly replete the lost amount to your fund, you will need to use more than 1/15th of your contribution.