Guide to T1036 Home Buyers' Plan Repayment

The Home Buyers' Plan (HBP) is a popular program that helps Canadians purchase their first home by allowing them to borrow from their own RRSP savings. While the withdrawal is tax-free at the time, it is not a gift. You are essentially lending money to yourself and must pay it back. Understanding the repayment process is essential to avoiding unexpected tax consequences. This guide covers the HBP withdrawal (Form T1036), the repayment rules, and strategies for managing your obligation.

How the Home Buyers' Plan Works

Under the HBP, you can withdraw up to $60,000 from your RRSP to put toward the purchase or construction of a qualifying home. If you are purchasing with a spouse or partner who also qualifies, each of you can withdraw up to $60,000, for a combined total of $120,000. The withdrawal is not subject to withholding tax and is not included in your income for the withdrawal year.

To qualify, you must generally be a first-time home buyer, meaning neither you nor your spouse or common-law partner owned a home that you lived in during the four-year period before the withdrawal. Some exceptions exist for persons with disabilities and for those helping a related person with a disability purchase a home.

Form T1036: The Withdrawal Form

Form T1036, titled "Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP," is the form you complete and give to your RRSP issuer (financial institution) to process the tax-free withdrawal. You can download it from the CRA website. Key fields include:

• Your name, address, SIN, and date of birth.
• The address of the qualifying home you are buying or building.
• A declaration that you meet the first-time buyer requirements.
• The amount you wish to withdraw (up to $60,000).
• The RRSP account from which the withdrawal will be made.

Your financial institution reviews the form and processes the withdrawal without withholding tax. You must have a written agreement to buy or build a qualifying home before you withdraw, and the home must be acquired before October 1 of the year following the withdrawal.

Repayment Requirements

You must repay the full amount withdrawn over a period of no more than 15 years. Repayment begins in the second calendar year following the year of your withdrawal. For example, if you withdrew funds in 2025, your first repayment is due when you file your 2027 tax return (filed in early 2028).

The minimum annual repayment is calculated by dividing your remaining HBP balance by the number of years left in your repayment period. For instance, if you withdrew $60,000 and have 15 years to repay, your minimum annual repayment is $4,000. Each year, the CRA calculates your minimum required repayment and shows it on your Notice of Assessment or in CRA My Account.

How to Make Your Repayment

You do not send a cheque to the government. Instead, you make an RRSP contribution and designate it as an HBP repayment when you file your tax return:

Step 1: Contribute to Your RRSP

Make a contribution during the year or within the first 60 days of the following year. The contribution must be at least equal to your minimum required HBP repayment.

Step 2: Complete Schedule 7

When filing your tax return, complete Schedule 7 (RRSP, PRPP, and SPP Contributions and Transfers). Report your total RRSP contributions and designate how much to apply as an HBP repayment.

Step 3: Designate on Your Return

The amount designated as HBP repayment will not be claimed as an RRSP deduction. It goes directly toward reducing your HBP balance. Any contribution amount beyond your repayment designation can be claimed as a regular RRSP deduction.

What Happens If You Miss a Repayment

If you do not make the required minimum repayment, the shortfall is added to your taxable income for that year. For example, if your minimum repayment is $4,000 and you only designate $2,500, the remaining $1,500 will be included in your income and taxed at your marginal rate. Your HBP balance is also reduced by the shortfall amount, so you will not owe it again, but you will have paid tax on it.

Strategies for Managing Your HBP Repayment

• Set up automatic RRSP contributions: Arrange monthly or bi-weekly contributions that add up to at least your minimum annual repayment.
• Contribute more than the minimum: Paying off your HBP balance faster means you can start using RRSP contributions as tax deductions sooner.
• Use your tax refund: Consider putting your refund into your RRSP and designating it as an HBP repayment.
• Track your balance: Check your HBP balance annually through CRA My Account or your Notice of Assessment.

Special Circumstances

Leaving Canada: If you become a non-resident, your entire remaining HBP balance must be included in your income for the year you emigrate, unless you make the full repayment before leaving.

Death of the HBP participant: The remaining balance is included in income on the final tax return, unless the surviving spouse or common-law partner elects to take over the repayment obligation.

Separation or divorce: Each person is responsible for their own HBP repayment regardless of changes in relationship status.

Example Repayment Calculation

Suppose you withdrew $45,000 under the HBP in 2025. Your repayment begins in 2027 and runs through 2041 (15 years). Your minimum annual repayment is $45,000 / 15 = $3,000 per year.

In 2027, you contribute $5,000 to your RRSP. On Schedule 7, you designate $3,000 as HBP repayment and claim the remaining $2,000 as an RRSP deduction. Your HBP balance drops from $45,000 to $42,000. The following year, the minimum becomes $42,000 / 14 = $3,000.

Related Resources

• How to Fill Out T3012A for RRSP Excess Contributions
• Guide to T1 Schedule 1 Federal Tax Calculation
• How to Fill Out BC428 Provincial Tax Credits
• How to File Taxes as a Newcomer to Canada
• Guide to T2201 Disability Tax Credit Certificate

Frequently Asked Questions

Can I repay the entire balance at once? Yes. Make a lump sum RRSP contribution and designate the full amount as your HBP repayment to eliminate the obligation entirely.

Do I need to contribute to the same RRSP I withdrew from? No. You can contribute to any RRSP in your name and designate it as HBP repayment on your return.

What if I sell my home? Selling your home does not affect your repayment obligation. You must continue making annual repayments.

Can I participate in the HBP more than once? Yes, if your HBP balance is zero and you meet the first-time buyer definition again (no home ownership in the past four years).

Final Thoughts

The Home Buyers' Plan is a powerful tool for first-time home buyers in Canada, but the repayment obligation should not be taken lightly. By understanding the rules, making timely contributions, and properly designating your repayments on Schedule 7, you can fulfill your obligation without any tax surprises. Stay on top of your HBP balance, set up automatic contributions, and use the CRA's online tools to track your progress.

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