by Cheryl LeBlanc
(Halifax, NS Canada)
My husband and I used this strategy for our down payment. We are now looking to pay back our first payment but not sure where to pay it back to? Should I have papers for this?
Great question Cheryl. The process of paying back the RRSP is quite straight forward and you don't need any special papers to do it.
The fist step is to make an RRSP contribution. You can choose to go through the same company that you used when you withdrew the funds. You can also make the RRSP contribution through another institution or Financial Planner, bank, trust company or any company that offers registered investments.
When you make the RRSP contribution, you will receive a tax receipt and this is used when you file your income taxes.
When it's time to file your income taxes for this year, you will allocate the amount of the RRSP contribution that you would like to apply to your First Time Home Buyer Withdrawal.
For example. You purchase an RRSP for $5000 this year and you must pay back $3000 toward your First Time Home Buyer (HBP) plan withdrawal. When you complete the RRSP contribution section of your income tax return, you would allocate $3000 toward the HBP Plan and then you would receive a tax deduction for the $2000 balance.
If you didn't allocate any of the contribution toward the home buyer plan, then in this example your income would be increased by $3000 (the amount that you were required to pay this year). You would then pay taxes based on this increased income.
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