February 6, 2013
The Latest Surprising Stats for RRSP Home Buyers Repayment & How it's Affecting Borrowers' Savings and Personal Taxes
Most people may know that as a first time home buyer you have to ability to withdraw up to 25K out of your RRSP for a down payment on a home without any tax implications. You do, however, have to pay it back into your RRSP otherwise there will be tax implications. It will become part of your taxable income just like any other withdrawal from your RRSP if you don't pay it back. As of 2011 only about 1/2 of people are paying it back into their RRSP. The implications of this result in less savings and compounding interest/growth over the long term and more personal income taxes to be paid.
You don't have to pay it back all at once. If you purchased a home this year and used the RRSP home buyers withdrawal you would have the rest of this year + 2 more full years grace period before having to put back in your RRSP. At that point you have 15 years to pay it back. Statistics also show the average RRSP home owner's withdrawal is about 10K. This amount over 15 years is about $666 a year or $55/month which should be a doable amount to repay. I would advise to set up an automatic payment every month so it just happens and you don't even have to think about it. Do more than the minimum if you can then when tax time comes you or your accountant just allocate the portion due for the repayment of your Home Buyers withdrawal and the rest will be regular contributions which will then be tax deductible.
As always, if you have any questions regarding this topic or anything else home or finance related please give me a call.
Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054
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