At Gedeon Law & CPA, we’ve worked with many Canadians who have taken out money from their RRSPs under the Home Buyers’ Plan (HBP) and then moved to the US with an unpaid balance.
As most Canadians know, HBP is a program that allows Canadians to withdraw up to$25,000 in a calendar year from their RRSP to buy or build a home. Generally, the withdrawals under the HBP program need to be repaid to the RRSP within a period of no more than 15 years.
But what happens when you move to the US and become a non-resident of Canada?
If you become a non-resident and you have an unpaid HBP balance, then you must choose one of the following options:
- Repay the remaining balance to your RRSP by the earliest of the following dates:
- before the time you file your tax return for the year that you become a non-resident; or
- 60 days after you become a non-resident.
- Include the remaining balance as RRSP income on line 129 of your tax return for the year that you become a non-resident.
Let’s take the example of Jennifer Juniper, who in 2008 withdrew $10,000 from her RRSPs under the HBP to buy a qualifying home. On November 10, 2012, she leaves Canada to live in New York City because she landed a job with a big law firm on Wall Street. At that time, her unpaid HBP balance is $4,000. Jennifer has 60 days after becoming a non resident of Canada, that is, until January 9, 2013, to repay the balance. She contributes $2,500 to her RRSPs on December 2, 2012, and $1,000 to her RRSPs on January 7, 2013, for a total contribution of $3,500. Jennifer completes and files Schedule 7 with her 2012 tax return to designate this contribution as a repayment under the HBP. Because she has not repaid the full amount, Jennifer has to include $500 in her 2012 income, calculated as $4,000 – ($2,500 + $1,000).
At Gedeon Law & CPA, we regularly assist Canadians with their cross-border tax issues when they move to the US.