Home Buyers Plan

Home Buyers Plan, how to participate

Home buyers plan is for you, as a first-time home buyer or builder

You intend to occupy the qualifying home as your principal place of residence.

You can withdraw a single amount or make a series of withdrawals throughout the same year and January of the following year, as long as the total of your withdrawals is not more than $20,000.

If you buy the home with your spouse or common-law partner, each can withdraw up to $20,000 from his or her "RRSP" Registered Retirement Savings Plan making a total of $40,000
A qualifying home is a housing unit located in Canada.

This includes existing homes and those under constructed

Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify.

A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in a housing unit located in Canada, also qualifies.

When do you have to repay?

Your first repayment is due the second year following the year in which you made your withdrawals.

You have up to 15 years to repay the amount that you withdrew from your "RRSP" Registered Retirement Savings Plan

You have to repay a minimum of 1/15 of the total amount each year until the full amount is repaid to your RRSP

Every year, you will receive a Home Buyers' Plan (HBP) Statement of Account with your Notice of Assessment or Reassessment.

This statement will show the total amount of withdrawals, the amount you have repaid and to date and the balance

Home Buyers Plan is a great help for first time home buyer

Tax Free Savings Account

Tax Free Savings Account '' TFSA" will become available in January 01, 2009

Tax Free Savings Account . . . ? for a lifetime of savings . . . free from taxes . . .

TFSA contributions are made from after tax dollars, withdrawals are tax free at anytime for any purpose

The amount withdrawn can be put back in, at a later date without reducing your contribution room.

Contributions to a spouse’s TFSA will be allowed and TFSA assets can be transferred to a spouse upon death

Canadians aged 18 and older can save up to $5,000 every year

Interest, investment income including capital gains, are tax-free, even when withdrawn.

The difference between RRSP and TFSA as highlight below:

Contributions to an RRSP are deductible and reduce your income for tax purposes, whereas,
your TFSA savings will not be deductible.

Withdrawals from an RRSP are added to your income and taxed at current tax rates, whereas, your TFSA withdrawals and growth within your account will not be tax

Tax Free Savings Account are tax-free savings, so take advantage of it asap

RRSP: Registered Retirement Savings Plan

RRSP: Registered Retirement Savings Plan is a Canadian Governments Program for retirement saving

RRSP: Registered Retirement Savings Plan is deduction for your tax planning

This Retirement Savings Plan or RSP is an account that provides tax benefits for saving for retirement in Canada.

RSP in the Income Tax Act allows a person to shelter financial property from income taxes.

RSPs help you reduce taxes: Contributions to RSP, up to limits described below, may be deducted from income before calculating income tax

A deduction limit is calculated as 18% of a person's earned income from the previous tax year, minus any "pension adjustment", up to a specified maximum.

This specified maximum is as shown in the table below:

* 2008 $20,000
* 2009 $21,000
* 2010 $22,000

After 2010 the RSP contribution limit will be indexed to the annual increase in the average wage.

A person with a marginal tax bracket of 40%, means that in an investment of $1000 in RSP, they would receive $400 back from your withholding taxes

Any RSP deductions not taken in a tax year are carried forward indefinitely to future tax years.

Every year, tax payer receives a Notice of (Re)Assessment from the Canada Revenue Agency, indicating their new RSP deduction limit.

Income earned in RSP (interest, corporate dividends, trust distributions, capital gains) is not taxed until money is withdrawn from the registered plan

Money may be withdrawn from an RSP in tax years when one is unemployed or when one is ready to retirement at age 69, it must be either cashed out or matured into a RRIF: Registered Retirement Income Fund

RSP accounts popularly promoted are: savings accounts, GIC: guaranteed investment certificates, stocks, bonds, and mutual funds

Gaining popularity is the Canadian Home Buyers Plan where Canadians can borrow, up to $20,000, tax-free from their RRSP "and another $20,000 from a spousal RSP" making a total of $40,000 towards buying their first residence.

This loan has to be repaid within 15 years after two years of grace.

RRSP or Registered Retirement Savings Plan is a good tax deduction program