RRSP Contribution Question

[Keebler Elf]

I have a big RRSP deduction limit for 2008 (over $25K). I plan on buying a condo in the next 6 months and using my existing RRSP to help finance the purchase (as a first time home buyer).

My question is this: Can I put a big chunk of my current cash into my RRSP for 2008 (resulting in a sizeable tax refund) and then withdraw it from the RRSP in the next 6 months? In effect, I would be increasing my immediately available cash via the additional tax refund to facilitate the finanching of the condo purchase.

I realize all the RRSP money must be paid back into the RRSP within 15 years. That won't be an issue.

Edit: A couple things I just learned... the most I could withdraw from the RRSP is $20K and there's a minimum annual repayment of 1/15 of the amount withdrawn.

 

[hoser1970]

Yes.

Generally, the funds must be held within your RRSP for a minimum of 90 days before they can be withdrawn under the First Time Home Buyers Plan.

Just make sure your closing date is more than 90 days from the date of cocntribution. Better yet, make it 100 days, to ensure you provide sufficient time to process the withdrawal and have the funds available on your closing date.

see below for more details:

http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html#P306_28865

 

[hoser1970]

Edit: A couple things I just learned... the most I could withdraw from the RRSP is $20K and there's a minimum annual repayment of 1/15 of the amount withdrawn.

Keebler, note that the 2009 Federal Budget proposed increasing the amount that could be withdrawn under the Home Buyer's Plan from $20,000 to $25,000, so you should still be OK.

http://www.budget.gc.ca/2009/plan/bpa5a-eng.asp#2

 

[gww]

If you do a regular annual / weekly contribution to an RSP that is greater than the minimum annual repayment only claim as an annual repayment what you have to (minimum 1/15 of the amount you take out) each year and use the rest as a normal deduction. No benefit to repaying it early if you plan to contribute over the minumum anyway for the next 15 years - other than whatever income that would make.

 

[Keebler Elf]

Generally, the funds must be held within your RRSP for a minimum of 90 days before they can be withdrawn under the First Time Home Buyers Plan.

Thanks! That's a very good tip.

 

[Keebler Elf]

Keebler, note that the 2009 Federal Budget proposed increasing the amount that could be withdrawn under the Home Buyer's Plan from $20,000 to $25,000, so you should still be OK.

http://www.budget.gc.ca/2009/plan/bpa5a-eng.asp#2

Another excellent tip. Thanks!