There are only two ways to withdraw money from an RRSP without paying tax at the time of withdrawal: the Home Buyers’ Plan (HBP) and the Lifelong Learning Plan (LLP). The HBP lets you take up to $60,000 to buy or build your first home. The LLP lets you take up to $20,000 to pay for full-time education. Both work like interest-free loans from your own retirement savings. The money comes out tax-free, but you have to repay it to your RRSP on a set schedule. Miss a repayment, and the CRA adds the shortfall to your taxable income for that year.
What a Regular RRSP Withdrawal Costs
Any withdrawal outside these two programs is taxed twice over. Your financial institution withholds tax on the spot, at 10% on amounts up to $5,000, 20% on $5,001 to $15,000, and 30% on anything over $15,000 (5%, 10%, and 15% in Quebec). Then the full amount is added to your income when you file, and if it pushes you into a higher bracket you can owe more than what was withheld.1Canada Revenue Agency (CRA). Tax Rates on Withdrawals
The HBP and LLP bypass both the withholding and the income inclusion, provided you meet every condition and keep up with repayments.
Home Buyers’ Plan: Who Qualifies
The HBP lets you withdraw up to $60,000 from your RRSPs to buy or build a qualifying home in Canada.2Canada.ca. The Home Buyers’ Plan The limit was raised from $35,000 on April 16, 2024. If you’re buying with a spouse or common-law partner who also qualifies, each of you can withdraw up to $60,000 from your own RRSPs for the same home.
You have to meet all of these conditions:3Canada Revenue Agency (CRA). How to Participate in the Home Buyers’ Plan
- You’re a first-time buyer. You did not live in a home that you or your current spouse owned as your principal residence at any time in the current calendar year before the withdrawal (except the 30 days immediately before) or in the four preceding calendar years.4Canada Revenue Agency (CRA). Definitions for Home Buyers’ Plan
- You have a signed written agreement to buy or build a qualifying home in Canada.
- You’re a resident of Canada from the first withdrawal until you buy or build the home.
- You intend to live in the home as your principal residence within one year of buying or building it.
- The funds have been in the RRSP for at least 90 days before you withdraw them. Contributions inside that 89-day window can still be pulled out, but the portion exceeding the RRSP’s fair market value after withdrawal loses its tax deduction.5Canada Revenue Agency (CRA). How to Make Withdrawals From Your RRSPs Under the Home Buyers’ Plan
Not every RRSP will let you do this. Locked-in RRSPs and some group RRSPs won’t process an HBP request, so check with your plan administrator before counting on those funds.3Canada Revenue Agency (CRA). How to Participate in the Home Buyers’ Plan
The first-time buyer requirement is waived if you’re withdrawing to buy or build a home for a specified disabled person, or if you’re a disabled person buying for yourself. Every other condition still applies. You can also participate in the HBP again if your previous HBP balance is zero on January 1 of the year you plan to withdraw, and you meet the first-time buyer test again as of that year.3Canada Revenue Agency (CRA). How to Participate in the Home Buyers’ Plan
Lifelong Learning Plan: Who Qualifies
The LLP lets you withdraw up to $10,000 per year, to a lifetime maximum of $20,000, to pay for full-time education or training. Your spouse or common-law partner can run a separate LLP from their own RRSPs at the same time.6Canada.ca. Lifelong Learning Plan Withdrawals
The education has to be at a designated educational institution, and the program has to require at least three consecutive months of full-time study. Students certified as having a disability that prevents full-time attendance can qualify while enrolled part-time. If you withdraw more than $10,000 in a single year, the excess is included in your income for that year and taxed normally.6Canada.ca. Lifelong Learning Plan Withdrawals
One boundary that catches people: the LLP student has to be you or your spouse. You cannot use the LLP to pay for a child’s education. An RESP is the vehicle for that.
Making the Withdrawal
Each program has its own CRA form. You fill out your part, then hand it to your RRSP issuer to complete their section and release the money.
- For the HBP, use Form T1036 (Home Buyers’ Plan Request to Withdraw Funds from an RRSP). You need a separate form for each RRSP you’re pulling from.5Canada Revenue Agency (CRA). How to Make Withdrawals From Your RRSPs Under the Home Buyers’ Plan
- For the LLP, use Form RC96 (Lifelong Learning Plan Request to Withdraw Funds from an RRSP).7Canada Revenue Agency (CRA). RC96 Lifelong Learning Plan (LLP) Request to Withdraw Funds From an RRSP
Both forms ask for your Social Insurance Number, the issuer’s name, your account number, and the exact amount. The HBP form also asks for the home’s address; the LLP form asks for the institution’s name. Fill in every field. An incomplete form can be processed as a regular withdrawal, which means withholding tax comes off immediately.
Once the issuer confirms the account holds enough cleared funds, the money is usually released within a few business days. You’ll receive a T4RSP slip by the end of February the following year showing the total withdrawn and identifying it as an HBP or LLP amount.8Canada Revenue Agency (CRA). Filing the T4RSP and T4RIF Information Returns You use that slip when you file, to confirm the withdrawal shouldn’t be taxed as income.
Repaying the HBP
You have 15 years to repay an HBP withdrawal to your RRSP. Each year, the CRA calculates your minimum repayment by dividing your remaining balance by the years left in the repayment period.9Canada.ca. How to Repay the Amounts Withdrawn From Your RRSPs Under the HBP
When repayments begin depends on when you first withdrew:
- If your first withdrawal was before January 1, 2022, repayments started the second year after the withdrawal year.
- If your first withdrawal was between January 1, 2022, and December 31, 2025, a temporary three-year grace period applies, and repayments begin in the fifth year after your first withdrawal. So if you first withdrew in 2023, your first repayment is due in 2028.9Canada.ca. How to Repay the Amounts Withdrawn From Your RRSPs Under the HBP
You can always repay more than the minimum. Early repayments shrink your balance and lower future minimums. One thing to know: repayments designated as HBP repayments do not give you an RRSP deduction. You already deducted the money when you originally contributed it, so you don’t get to deduct it a second time.9Canada.ca. How to Repay the Amounts Withdrawn From Your RRSPs Under the HBP
Repaying the LLP
LLP withdrawals are repaid over 10 years at one-tenth of the total per year. When repayments begin depends on whether the student stays enrolled:10Canada.ca. Repayments to Your Registered Retirement Savings Plan Under the Lifelong Learning Plan
- If the LLP student qualifies as a full-time student for at least three months every year, repayments begin in the fifth year after the first LLP withdrawal.
- If the student stops qualifying for two consecutive years, repayments begin in the second of those two years.
- If the student never qualifies for three consecutive months in any year, repayments begin in the second year after the withdrawal year.
The CRA sends a notice each year showing your required LLP repayment amount.
How to Designate a Repayment on Your Return
An RRSP contribution made during your repayment period doesn’t automatically count as an HBP or LLP repayment. You have to designate it. Fill out Schedule 7 (RRSP, PRPP and SPP Contributions and Transfers, and HBP and LLP Activities) and enter the repayment amount on line 24600 of your return.9Canada.ca. How to Repay the Amounts Withdrawn From Your RRSPs Under the HBP
You can make the contribution any time during the year the repayment is due or within the first 60 days of the following year, the same window that applies to regular RRSP contributions. Even if your RRSP deduction limit for the year is zero, you can still contribute and designate the amount as a repayment. Repayment contributions are not treated as regular contributions, so they won’t trigger an over-contribution penalty.9Canada.ca. How to Repay the Amounts Withdrawn From Your RRSPs Under the HBP
Skipping the Schedule 7 designation is one of the most common mistakes. If you contribute but forget to designate, the CRA counts the repayment as missed and adds the minimum amount to your income. You’ll have put the money in without getting either the repayment credit or a deduction.
What a Missed Repayment Costs
If you don’t repay the minimum amount for a given year, or repay less than the minimum, the shortfall is added to your taxable income for that year. The CRA treats it as though you made a regular RRSP withdrawal, and it appears on line 12900 of your return.9Canada.ca. How to Repay the Amounts Withdrawn From Your RRSPs Under the HBP
The same rule applies to LLP repayments. Any amount not repaid when due is included in your income for the year it was due.11Canada.ca. Lifelong Learning Plan The missed amount does reduce your outstanding balance, so you won’t owe it again in a future year. But you’ve permanently lost that RRSP contribution room and paid tax on the amount. Over 10 or 15 years of missed payments, the entire withdrawal effectively becomes taxable income, which cancels out the reason for using either program in the first place.