So You Wanna Make An Offer…

I got a call today from a client who wants to take out their RRSPs to make an offer on a house, but, we aren’t sure if their offer will go through.  Now what? Will Revenue Canada tax him on the funds he withdrew? Can he put them back if this offer doesn’t go through? What if he finds another house he wants to buy, how does he get his money back again? If he decides not to buy anything can he fund his RRSPs again and not face any penalty? All good questions to which I have the answers!

Revenue Canada is surprisingly accepting of what’s happening in our surreal estate market these days. They know and understand offers come and go, deals fall through, and do not wish to tax someone for a house they did not end up buying for one reason or another within limits of course.

The following are the steps to ensure that if you remove funds from your RRSP via the Home Buyer’s Plan (HBP from now on), and your offer does not go through:

1. Remove from the HBP using theHome Buyer’s Plan Forms.

2. Fund your account and make the deposit on offer.

3. If your deposit does not go through, keep the funds in your account (preferably a savings account so you don’t use them).

4. Should you not end up making any purchases you can then fund your RRSP account again, but (and this is important), keep the receipt that you funded the same amount you took out.

6. Along with the receipt plus relevant paperwork about your lost offers (dates, emails, offers etc), send a letter to Revenue Canada explaining what happened and why you’re funding your RRSP back.

7. This letter must be written and sent by December 31st of the following year in order not to get taxed on this money.

Example- if you’re reading this in September 2015, you can fund your RRSP account by December 31st 2016 and not face a penalty.

For more information you should visit the CRA website which will break things down for you in detail.

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