Who says RRSPs are strictly for retirement? The Home Buyers’ Plan (HBP) is a great way to dip into your RRSP savings tax-free long before you’re rocking away your golden years on the front porch. If you and your spouse are first-time buyers, you can both withdraw up to $25,000 each to put toward a down payment—completely tax-free. This strategy works particularly well in situations where one spouse has no income. That’s because the working spouse—provided she has the RRSP contribution room—can contribute $25,000 to her own RRSP as well as $25,000 to a spousal RRSP, doubling the amount a couple can withdraw. Two things to watch out for: if you contribute to your spouse’s RRSP, you can’t withdraw the spousal amount until at least two calendar years after you made the last contribution, and you’ve got to pay the money back in 15 years, starting the second year after it was withdrawn from your RRSP, or you’ll have to start paying taxes on it.
Tax savings: Take, for example, Nova Scotia resident Sarah, who earns $80,000 per year. Normally, money withdrawn from her RRSP would be subject to her 39% marginal tax rate. But by using the HBP to withdraw $25,000 from her RRSP, Sarah saves herself $9,668 in taxes.