Most people intend to retire to their own homes after retirement from work, and to aid this; the Canadian government has a program to facilitate and ease buying a home in Canada. The Home Buyer’s Plan (HBP) is a program that allows Canadians to withdraw funds from their Registered Retirement Savings Plans (RRSPs) towards HBP.
This program helps Canadians buy or build a qualifying home for themselves or a related person living with a disability. To access this fund, you’ll need to complete the T1036 form.
The T1036 Form aka Home Buyer’s Plan
A T1036 is a form to be completed by Canadians who need funding from their RRSP to build or buy a home for themselves or a relative with a disability. This form is also known as the Home Buyer’s Plan, and the Canadian government established it to encourage taxpayers to save a part of their income towards their retirement. Persons living with a disability can consider HBP as a type of disability tax credit they can leverage
During active working years, the funds one puts there are free from taxes until withdrawals are made. Withdrawals can be made from an RRSP as long as you own the account.
Taxes will not be held on any withdrawn amount of CA$35,000 or less. You can avoid paying tax on the money you withdraw by paying at least 1/15 of the whole amount withdrawn yearly. As long as you make the average minimum repayment, the CRA will not tax your withdrawal.
Although some RRSPs like Locked-in or Group RRSPs do not allow withdrawal of funds, you can withdraw and repay the funds within 15 years with HBP. You can make several HBP funding applications, provided you withdraw the whole amount within the same calendar year.
Note that you must refund all the funds you withdrew previously in full at the beginning of the calendar year for recurring applications. You’d be eligible to apply for another HBP if you didn’t own a home in the year of withdrawal or the past four years.
Who Should use the T1036?
The T1036 Home Buyers’ form is for Canadian residents who intend to make the new-found house a permanent place of residence for themselves or relatives with disabilities. The plan allows a maximum withdrawal of CA$35,000.
Below are some of the conditions you must meet to qualify for the T1036 Home Buyers’ Plan form:
- You must be a resident of Canada.
- You must be a first-time home builder or buyer.
- You must reside or intend to live in the home as your main base within one year of acquisition.
- If building or buying for a disabled relation, they must intend to live there for at least one year.
- You must possess a written legal agreement to buy or build a home for yourself or a related person with a disability.
- All contributions must be in the RRSP account for at least 90 days before you can withdraw them under the HBP.
- You cannot have owned the home for more than 30 days before the date you withdraw the funds. Also, you must purchase the home before October 1 of the year after you make the withdrawal.
The funds you can access to aid your HBP depend on the amount you have in your RRSPs. You can withdraw up to CA$35,000 to fund buying or building your home. Repayment commences the second year after the purchase, and you have up to fifteen years to repay the amount to your RRSP.
For couples or common-law partners, you are both eligible to withdraw up to CA$25,000 each from your RRSPs. This is only applicable if you’re a resident of Canada. The CRA expects you to complete an income tax return yearly starting from the year you withdraw until the money is repaid.
Note that if you fail to repay the required amount for the year, you will have to file it as income on line 129 of your income tax return. You can get the form from the CRA website in the pdf version and then print it out, or you can download the pdf fillable version here.
Sections in a T1036 Form
The T1036 form is a detailed two-page form divided into Part A, Part B, and Part C. With two areas, Area1 and Area 2.
Section 1 – PART A
In this section, participants are required to fill out a questionnaire to determine if they can withdraw from their RRSP to aid HBP. You are to provide some details, and the information you provide here will determine whether or not you qualify for a withdrawal from your Registered Retirement Savings Plan (RRSP).
The first question in Part A is, “Are you a resident of Canada?” With two answer options provided: “Yes. Go to question 2” and “No. You can’t make an HBP withdrawal.”
This abruptly cuts off non-residents of Canada from qualifying for the withdrawal. A resident of Canada? You’re qualified for the next stage!
The second question on the T1036 form deals with a written agreement, asking whether or not the person who wants to acquire a house for themselves or a disabled relation had entered into a written agreement. If yes, then you can proceed to question 3. And if No, then your HBP withdrawal ends here.
There are five more questions in this part, all vying for a chance at disqualifying a participant from the RRSP. If you scale through this part, you can proceed to Part B.
- Part B
Part B deals more on personal information like First name, Last name, Social Insurance Number, address of the qualifying home being bought or built (you must include the number, street, route of the intended house), your City. e.t.c.
- Part C – Certification
This part of the T1036 form is where the form is finalized. You’d input the amount you want to withdraw and sign after acknowledging that the information you provided is complete and accurate.
This section of the T1036 form is not to be filled out by the applicant but by the RRSP issuer. It contains the issuer’s name, telephone e.t.c. with an accompanying message stating: “Do not send us this form. Keep it in your records” to encourage applicants to have their version of the receipt.
As someone looking to buy or build a home, you can access via the T1036 form to commence your application process and get funding. Bear in mind that you are responsible for ensuring all HBP conditions are met for yourself or a relative living with a disability if you apply on their behalf.