Canada home buyers’ plan

Photo of a happy Canadian family of five in the front yard of their home; mother standing in the foreground with the house key in one hand.

I am buying a home

Whether you are buying your first home (congratulations!), buying a new home or renovating your current home, there is a program to help.

Home Buyers’ Plan – allows you to withdraw from your Registered Retirement Savings Plan (RRSPs) to buy or build a home

First-Time Home Buyer Incentive – lowers your monthly mortgage payments on your first home

GST/HST new housing rebate – gives you back some of the GST/HST paid on a home

Home buyers’ amount – reduces your income taxes by providing a credit for the purchase of a home

Definitions for Home Buyer’s Plan (HBP)

Arm’s length – refers to a relationship or transaction between persons who act in their separate interests. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

Common-law partner – a person who is not your spouse, with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. They:

  • have been living with you in a conjugal relationship and this current relationship has lasted at least 12 continuous months

Note

In this definition, 12 continuous months includes any period you were separated for less than 90 days because of a breakdown in the relationship.

  • is the parent of your child by birth or adoption
  • has the custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support

Eligible withdrawal – this is an amount you withdraw from your RRSP after you have met the HBP conditions that apply to your situation.

First-time home buyer – Unless you are a person with a disability or you are helping a related person with a disability buy or build a qualifying home, you have to be a first time home buyer to withdraw funds from your RRSP(s) to buy or build a qualifying home under the Home Buyers’ Plan.

You are considered a first-time home buyer if, in the four year period, you did not occupy a home that you owned, or one that your current spouse or common-law partner owned.

Four-year period – The four-year period means the four years prior to a home purchase. The period begins on January 1 of the fourth year before the year you withdraw funds from your RRSP, and ends 31 days before the date you withdraw the funds.

HBP balance – your HBP balance, at any time, is the total of all eligible withdrawals you made from your RRSPs minus the total of all amounts you designated as an HBP repayment and amounts included in your income (because they were not repaid to your RRSPs) in previous years.

Non-arm’s length – generally refers to a relationship or transaction between persons who are related to each other. However, a non-arm’s length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances. For more information, see the definition of Arm’s length.

Participant – you are considered an HBP participant if:

  • you make an eligible withdrawal from your RRSP to buy or build a qualifying home for yourself
  • you make an eligible withdrawal from your RRSP to buy or build a qualifying home for a related person with a disability or to help such a person buy or build a qualifying home
  • you are the spouse or common-law partner of a deceased HBP participant and you have elected to continue making the repayments of the deceased participant

Participation period – your HBP participation period starts on January 1 of the year you make an eligible withdrawal from your RRSP and ends in the year your HBP balance is zero.

Person with disability – you are considered a person with a disability if you are entitled to the disability amount. For purposes of the HBP, a person with a disability includes you or a person related to you by blood, marriage, common-law partnership or adoption. A related person with a disability does not have to reside with you in the same home.

We consider a person to be entitled to the disability amount if one of the following situations applies:

  • the person was entitled to the disability amount (line 31600 of their Income Tax and Benefit Return) for the year before the HBP withdrawal, and still meets the eligibility requirements for the disability amount when the HBP withdrawal is made
  • the person was not entitled to the disability amount for any year before the HBP withdrawal, but a Form T2201, Disability Tax Credit Certificate, certified by a medical practitioner, is filed for the person for the year of the HBP withdrawal. If Form T2201 is not approved, your withdrawals will not be considered eligible withdrawals under the HBP, and will have to be included in your income for the year you receive them.

If all other eligibility requirements are met, we consider a person to be entitled to the disability amount even if costs for an attendant or for care in a nursing home were claimed as a medical expense by or on behalf of that person.

Pooled registered pension plan (PRPP) – is a retirement savings plan to which you or your employer or both can contribute. Any income earned in a PRPP is usually exempt from tax as long as it remains in the plan.

Qualifying home – a qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify. A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in a housing unit located in Canada, also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

Related persons – are not considered to be dealing with each other at arm’s length. Related persons include individuals connected by a blood relationship, marriage, common-law partnership, or adoption (legal or in fact). A corporation and another person, or two corporations, may also be related persons.

Resident of Canada – You have to be a resident of Canada when you receive funds from your RRSPs under the HBP and up to the time you buy or build a qualifying home. For more information about residency status, see Determinig your residency status or call 1-800-959-8281 (toll free within Canada and the United States), or 613-940-8495 (from outside Canada and the United States). We accept collect calls by automated response. You may hear a beep and experience a normal connection delay.

If you become a non-resident after a qualifying home is bought or built, you cannot cancel your participation in the HBP. However, special rules will apply to the repayment of your HBP balance. For more information, see The HBP participant becomes a non-resident.

RRSP deduction limit – the maximum amount you can deduct from contributions you made to your RRSPs or to your spouse’s or common-law partner’s RRSP for a year (excluding transfers to your RRSPs or certain types of qualifying income). The calculation is based, in part, on your earned income in the previous year. Pension adjustments (PA), past service pension adjustments (PSPA), pension adjustment reversals (PAR), and your unused RRSP deduction room at the end of the previous year are also used to calculate the limit.

Specified pension plan (SPP) – a pension plan or similar arrangement that has been prescribed under the Income Tax Regulations as a “specified pension plan” for purposes of the Income Tax Act (currently the Saskatchewan Pension Plan is the only arrangement prescribed to be a specified pension plan). Many of the rules related to RRSPs also apply to SPPs.

Spouse – a person to whom you are legally married.

Unrelated persons – might not be dealing with each other at arm’s length at a particular time. Each case depends upon its own facts. The following criteria will be considered to determine whether parties to a transaction are not dealing at arm’s length:

• whether there is a common mind which directs the bargaining for the parties to a transaction
• whether the parties to a transaction act in concert without separate interests; “acting in concert” means, for example, that parties act with considerable interdependence on a transaction of common interest
• whether there is de facto control of one party by the other because of, for example, advantage, authority or influence.

Source: CRA

Canada corporation tax rates

Federal rates

The basic rate of Part I tax is 38% of your taxable income, 28% after federal tax abatement.

After the general tax reduction, the net tax rate is 15%.

For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is:

  • 9% effective January 1, 2019
  • 10% effective January 1, 2018

Provincial or territorial rates

Generally, provinces and territories have two rates of income tax – a lower rate and a higher rate.

Lower rate

The lower rate applies to the income eligible for the federal small business deduction. One component of the small business deduction is the business limit. Some provinces or territories choose to use the federal business limit. Others establish their own business limit.

Higher rate

The higher rate applies to all other income.

Provincial and territorial tax rates (except Quebec and Alberta)

The following table shows the income tax rates and business limits for provinces and territories (except Quebec and Alberta, which do not have corporation tax collection agreements with the CRA). These rates are in effect January 1, 2021, and may change during the year.

Province or territoryLower rateHigher rateBusiness limit
Newfoundland and Labrador3%15%$500,000
Nova Scotia2.5%14%$500,000
New Brunswick2.5%14%$500,000
Prince Edward Island2%16%$500,000
Ontario3.2%11.5%$500,000
Manitobanil12%$500,000
Saskatchewan0%12%$600,000
British Columbia2%12%$500,000
Nunavut3%12%$500,000
Northwest Territories2%11.5%$500,000
Yukon0%12%$500,000

Source: CRA

PAYROLL

Payroll. Text in light box. Pink coffee mug on gray background

Find out if you need to make payroll deductions

If you are you a trustee, an employer, or a payer of other amounts related to employment, you have to register for a payroll account and follow the payroll requirements.

Seasonal or no employees

You must still tell us if you have no source deductions to remit for a month or quarter if you usually remit payroll.

Trustees

A trustee includes a liquidator, a receiver, a receiver-manager, a trustee in bankruptcy, an assignee, an executor, an administrator, a sequestrator, or any other person who performs a function similar to the one a trustee performs.

A trustee does both of the following:

  • authorizes a payment or causes a payment to be made for another person
  • administers, manages, distributes, winds up, controls, or otherwise deals with another person’s property, business, estate, or income

Note 

The trustee is jointly and severally, or solidarily, liable for deducting and remitting the income tax, Canada Pension Plan contributions, and employment insurance premiums for all payments the trustee makes.

Employers

We generally consider you to be an employer if you:

  • pay salaries, wages (including advances), bonuses, vacation pay, or tips to your employees
  • provide certain taxable benefits to your employees (for example, an automobile or allowances)

An individual is an employee if the worker and the payer have an employer-employee relationship. This relationship is referred to as employment under a contract of service.

Although the intent of a written contract might mean that an individual is self-employed (and therefore working under a contract for services), we cannot consider the individual as self-employed if there is evidence of an employer-employee relationship.

If you or a person working for you is not sure of the worker’s employment status, either one of you can request a ruling to determine the status. For more information, go to How to get a CPP/EI ruling.

For more information on employment status, see Guide RC4110, Employee or Self-Employed?

Forms and publications for employers

Payers of other amounts related to employment

A payer of other amounts can be an employer, a trustee, an estate executor, a liquidator, an administrator, or a corporate director who pays other types of income related to an employment. This income can include:

To see if you should deduct CPP, EI or tax from these payments, see the Special payments chart.

If you determine that you are a payer, you have to fill out the T4A slip, Statement of Pension, Retirement, Annuity, and Other Income, if you made any of the payments listed above (with the exception of retiring allowances) and one of the following applies:

  • the total of all payments in the calendar year was more than $500
  • you deducted tax from any payment

Source: CRA