20 – THE HOME BUYER’S PLAN (HBP) & THE LIFELONG LEARNING PLAN (LLP)

Withdrawing Money from the Home Buyers’ Plan (HBP)
How to Report Home Buyers’ Plan (HBP) Repayments on the T1 Return and Schedule 7
How to Handle Home Buyers’ Plan (HBP) Non-Payments, Partial Payments, and Additional Payments
The Lifelong Learning Plan (LLP) – Accessing RRSP Funds for Education

Withdrawing Money from the Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) is a popular program in Canada that allows first-time home buyers to withdraw money from their Registered Retirement Savings Plan (RRSP) to purchase or build a home. Understanding how it works is essential for anyone preparing taxes or advising clients.

How Much Can Be Withdrawn?

As of 2024, the maximum withdrawal amount under the HBP is $60,000 per eligible individual.
If a couple is buying their first home and both are eligible, each can withdraw $60,000, for a combined total of $120,000.
The funds must come from an RRSP that the individual has contributed to and owns.

Reporting the Withdrawal

When a client withdraws funds under the HBP, their financial institution issues a T4RSP slip.
The withdrawn amount is reported in Box 27 of the T4RSP slip.
Importantly, this withdrawal does not count as taxable income for the year it is withdrawn.
The CRA is notified of the withdrawal and will track repayment obligations.

Repayment Rules

Repayments are a key part of the HBP, and as a tax preparer, you need to ensure clients understand the rules:

Repayment Period:
- The total withdrawn amount must be repaid to the RRSP over a 15-year period.
- If the full $60,000 is withdrawn, the minimum annual repayment is $4,000 per year.
- Repayments can be made faster, but the 15-year period sets the minimum schedule.
Start of Repayment:
- Originally, repayments start two years after the withdrawal, giving clients time to settle into their new home.
- For withdrawals made between January 1, 2022, and December 31, 2025, this repayment grace period is extended to five years.
- Clients can choose to start repaying earlier if they wish.
How Repayments Are Made:
- Clients do not need to make a separate payment labeled “HBP repayment.”
- Any RRSP contribution can be allocated to the repayment. For example, if the minimum repayment is $4,000 and a client contributes $10,000 to their RRSP, $4,000 of that contribution counts toward the HBP repayment, and the remaining $6,000 counts as a normal RRSP contribution.

Tracking HBP Repayments

The CRA tracks HBP repayments through the client’s Notice of Assessment.
The Notice of Assessment will indicate:
- The minimum repayment amount required for the year.
- The remaining balance of the HBP withdrawal that must still be repaid.
Tax preparers should always check the Notice of Assessment or the CRA’s My Account for up-to-date information on repayment obligations.

Key Takeaways

The HBP allows first-time home buyers to access up to $60,000 from their RRSP without immediate tax consequences.
Repayments are required over 15 years, with a current grace period of up to five years for eligible withdrawals.
Contributions to the RRSP can serve as repayment, making it flexible and convenient for clients.
Always verify repayment information through the Notice of Assessment or CRA’s online services to avoid missed payments or penalties.

How to Report Home Buyers’ Plan (HBP) Repayments on the T1 Return and Schedule 7

The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw funds from their RRSP without immediate tax consequences. However, once money has been withdrawn, it must be repaid over time to avoid it being treated as taxable income. As a tax preparer, it’s important to understand how to properly report HBP repayments on a client’s T1 personal income tax return.

Step 1: Determine the Required Repayment

Every year, a portion of the withdrawn HBP amount must be repaid to the RRSP.
The Notice of Assessment (NOA) from the CRA will specify the minimum repayment for the year.
The standard repayment period is 15 years, meaning each year you repay 1/15th of the total HBP withdrawal.
Example: If a client withdrew $18,000, the annual repayment is $1,200 ($18,000 ÷ 15).

Tip: Even if the client contributes more than the minimum, they can choose to allocate extra contributions toward the HBP repayment, which may help them get back on track faster.

Step 2: Allocate RRSP Contributions

When a client makes RRSP contributions for the year, a portion can be designated as HBP repayment.
It’s not necessary to make a separate RRSP contribution specifically for the repayment. Any contribution can be split:
- Part of it satisfies the HBP repayment.
- The remainder counts as a normal RRSP contribution eligible for deduction.
Example: A client contributes $20,000 to their RRSP, with an annual HBP repayment of $1,200.
- Allocate $1,200 to the HBP repayment.
- The remaining $18,800 is available for a standard RRSP deduction.

Step 3: Reporting on the T1 Return

Schedule 7 (RRSP, PRPP, and SPP Unused Contributions and HBP/LLP Repayments):
- Enter the HBP repayment amount for the year.
- This ensures the CRA knows the client has made the required repayment.
T1 Summary:
- The standard RRSP deduction is reduced by the HBP repayment portion.
- In the example above, the client deducts $18,800 on line 208, which is the total RRSP contributions minus the HBP repayment.

Step 4: Verify with Notice of Assessment

Always check the client’s NOA or CRA My Account to confirm:
- Remaining balance of the HBP withdrawal.
- Correct annual repayment amount.
This prevents errors that can trigger reassessments or missed repayments.

Key Points to Remember

HBP repayments are mandatory but not treated as taxable income.
Repayment period is normally 15 years, with a minimum repayment calculated each year.
Contributions to RRSPs can cover both HBP repayments and regular RRSP deductions without separate deposits.
Always consult the Notice of Assessment for accurate repayment figures.

How to Handle Home Buyers’ Plan (HBP) Non-Payments, Partial Payments, and Additional Payments

The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw funds from their RRSPs to buy a home. While this is a valuable tool, it comes with a repayment obligation. As a tax preparer, it’s important to understand how to deal with situations where the client either does not make the full repayment, makes a partial repayment, or wants to pay back more than the minimum.

1. What Happens if the Client Doesn’t Make the Required Repayment

If the client does not make any repayment in a given year, the minimum repayment amount is added to their income for that year.
This means the client will pay tax on the amount that should have been repaid, as if they had withdrawn that money from their RRSP for personal use.
Example:
- Annual HBP repayment required: $1,200
- Sarah does not make any RRSP contribution that year.
- The $1,200 is included in her income and taxed accordingly.

2. Partial Repayments

If a client makes only a partial repayment, the difference between the required repayment and the actual repayment is added to their income for the year.
Example:
- Required repayment: $1,200
- Sarah contributes $900 toward her HBP repayment.
- $900 is applied to the repayment, leaving $300 as income inclusion on her tax return.
Important: Always ensure the partial repayment is allocated correctly on Schedule 7. This ensures the CRA tracks the remaining HBP balance accurately.

3. Additional or Full Repayments

Clients can choose to repay more than the minimum in any given year. This can be useful if they want to clear the HBP balance sooner or maximize RRSP growth.
Example:
- Remaining HBP balance: $16,800
- Sarah contributes $16,800 in the current year.
- Her HBP balance is now fully repaid, and she can deduct any remaining RRSP contributions normally.
Clients can also make a partial top-up repayment, reducing future minimum repayments.
- Example: Sarah repays $10,000 toward a $16,800 balance.
- Remaining balance: $6,800
- The CRA will recalculate future minimum repayments by dividing the remaining balance by the remaining repayment years.

4. Key Points to Remember

HBP repayment is not interest-bearing: The “loan” is essentially to themselves, so there’s no interest owed to the CRA.
Repayment flexibility:
- Minimum repayment each year is required.
- Clients can repay less (taxable income is included) or more (reduces future required payments).
Reporting:
- Include unpaid amounts in income for the year.
- Ensure all repayments (partial, full, or additional) are accurately recorded on Schedule 7 to track remaining balances.
Strategic planning: If there’s no immediate advantage to repaying early, clients can simply make the minimum repayments over the 15-year period.

This system allows clients to manage their repayments flexibly while ensuring the CRA has accurate records of amounts owing. As a tax preparer, your role is to track repayments carefully, advise clients on potential tax implications of non-payments, and help them optimize their RRSP strategy.

The Lifelong Learning Plan (LLP) – Accessing RRSP Funds for Education

The Lifelong Learning Plan (LLP) is another program under the Registered Retirement Savings Plan (RRSP) that allows Canadians to withdraw funds from their RRSPs without paying tax, similar to the Home Buyers’ Plan (HBP). While it is not as commonly used as the HBP, it can be a valuable tool for financing full-time education or training for yourself or even for your spouse or common-law partner.

1. Purpose of the Lifelong Learning Plan

The LLP allows individuals to withdraw funds from their RRSPs to finance full-time education or training.
Withdrawals are allowed for:
- The individual’s own education.
- The education of a spouse or common-law partner.

This flexibility makes the LLP a useful tool for families where either partner is pursuing full-time studies.

2. Withdrawal Limits

The annual withdrawal limit is currently $10,000 per person.
If both spouses are eligible, each can withdraw up to $10,000 from their own RRSPs, allowing a combined total of $20,000 for education funding.
Withdrawals do not affect your taxable income in the year of the withdrawal. The CRA tracks the plan separately to ensure proper repayments.

3. Repayment Rules

LLP withdrawals must be repaid to the RRSP over a 10-year period.
Repayments typically start up to five years after the initial withdrawal, depending on the end date of the educational program. This is different from the Home Buyers’ Plan, which has a shorter repayment start period.
Each year, the minimum repayment is determined based on the total amount withdrawn divided over the repayment period. For example:
- If a person withdraws the full $10,000 limit, the minimum annual repayment would be $1,000 per year for 10 years.

4. Reporting LLP Withdrawals and Repayments

When funds are withdrawn under the LLP, the financial institution issues a T4RSP slip, showing the amount withdrawn in box 25.
Withdrawals do not increase taxable income in the year they are taken.
Annual repayments are allocated from RRSP contributions and are reported on Schedule 7, similar to the Home Buyers’ Plan.
When a repayment is made, only the portion allocated to the LLP repayment is subtracted from the RRSP contribution deduction. Any remaining contribution can still be claimed as a deduction.

5. Key Differences Between LLP and HBP

Feature	Home Buyers’ Plan (HBP)	Lifelong Learning Plan (LLP)
Purpose	Buy a first home	Finance full-time education
Maximum withdrawal	$60,000 per person	$10,000 per person
Repayment period	15 years	10 years
Repayment start	2–5 years after withdrawal	Up to 5 years after withdrawal, depending on program end date
Eligible for spouse	Only HBP if spouse also buys first home	Yes, for spouse’s full-time education

6. Practical Example

Suppose Jane withdraws $6,800 under the LLP to pay for her studies.
Her minimum repayment for the first year is $1,000.
Jane contributes $6,800 to her RRSP that year.
She allocates $1,000 of that contribution toward her LLP repayment.
The remaining $5,800 can be claimed as a deduction on line 208 of her tax return.

This approach ensures that LLP repayments are correctly accounted for without affecting the tax deduction for her other RRSP contributions.

7. Summary

The LLP works very similarly to the Home Buyers’ Plan, with differences mainly in withdrawal limits, repayment periods, and eligibility for spouse education. As a tax preparer, it’s important to:

Verify eligibility for the LLP (full-time study for the individual or spouse).
Track withdrawals and repayment schedules.
Allocate RRSP contributions properly to account for LLP repayments on Schedule 7.

With careful record-keeping and proper reporting, clients can use the LLP to fund education without immediate tax consequences, while staying on track with repayments over the 10-year period.