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Are you saving up to buy your first home? The Home Buyers’ Plan (HBP) can help you get there. This government program enables first-time buyers to borrow money from their registered retirement savings plan (RRSP) to purchase or build a property.
Earlier this year, the HBP got a significant makeover. Here’s what’s new about the HBP, plus how you can use it together with other savings tools: a first home savings account (FHSA), a tax-free savings account (TFSA) and—recently introduced in Canada—EQ Bank’s Notice Savings Account. Read on for more details.
How has the Home Buyers’ Plan changed?
Home buyers should know about two major changes to the HBP. First, you can take out more money from your RRSP to buy or build a home—the maximum withdrawal amount has increased from $35,000 to $60,000, as of mid-April 2024. Couples can withdraw up to $120,000.
Second, you have more time to pay back your RRSP. As a temporary relief measure, home buyers who make an HBP withdrawal between Jan…
Can I sell my cottage tax-free?
– moneysense.ca
How will the $200,000 tax-free capital gains affect our non-principal residence? Is each tenant entitled to $200,000? My wife and I are original owners / joint tenants of our cottage and we expect to sell before we hit the retirement home in a few years. The original building and properties costs were less than $10,000. Current assessment is $120,000. Our joint marginal tax rate is 20% and average tax rate 10%.
—Charles
Can you avoid capital gains on a cottage?
Cottages can be great for unwinding and spending quality time with family. However, owning a cottage can be expensive when it comes to maintenance costs and ultimately to income tax.
Assuming you have another home that you live in, Charles, there will be tax implications from the sale of one of your two properties. You can actually claim the principal residence exemption for your cottage, making the sale tax-free without limits. But I’m guessing the capital gain on your house would be larger and more preferable to shelter from capital gains tax as your principal residence…
Is now the time for retirees to sell stocks and buy GICs?
– moneysense.ca
My husband is retired and concerned that his money that is invested in his RRSP and TFSA is fluctuating too much. He is retired and is wondering if his funds should be in a GIC account as it’s paying 4% and not losing principal. He’s concerned in this volatile market.—Rodeen
Are GICs a good idea for retirement?
As you noted, Rodeen, guaranteed investment certificate (GIC) rates have risen to levels we have not seen in over 15 years. That said, they are starting to decrease and look poised to decline further over the balance of 2024 and into 2025. There are one- to five-year rates that are between 4% and 5%, and even slightly over 5% if you shop around. You may not get these rates at major banks, where rates may be 1% to 2% lower than that, but trust companies, credit unions and online banks generally offer a healthy premium to the big banks.
Are GIC rates going up in Canada?
At the start of 2022, GIC rates were just starting to rise but were still less than 3%…
How do the RRSP contribution carry-forward rules work?
– moneysense.ca
If I have $25,000 contribution room left in my RRSP, can I take that all at once plus my regular RRSP contribution of $31,560 for the tax year 2024? Effectively making a contribution of $56,560 to my RRSP?—Lorraine
The rules around RRSP contribution room
As soon as a taxpayer starts to earn income—like employment income, self-employment income, royalties, research grants or net rental income—they accumulate room to contribute to their registered retirement savings plan (RRSP). There are no age limits, so a teenager with a part-time job can start to build their RRSP room as long as they file a tax return to report their earned income.
How does an RRSP carry-forward work?
Your RRSP room carries forward, meaning the amount is cumulative. So, 18% of your earned income for the previous year, up to the current year’s maximum contribution limit, becomes your RRSP room for the year. For 2024, the maximum new RRSP room a taxpayer can earn is $31,560 for those with at least $175,333 of earned income in 2023…
