From: AlanBaggett@volcanomail.com   
      
   Three Smart Ways To Tap Into Your RRSP : CRA SOTW   
      
   Article by Samantha Prasad   
   Minden Gross LLP   
      
   We all know the cardinal rule relating to RRSP withdrawals before maturity:   
   DON'T DO IT! The tax hit on withdrawals from your RRSP has always been a huge   
   obstacle for using it as a source of cash.   
      
   However, there are three strategies that effectively allow your RRSP to make a   
   "loan" to you, rather than an actual with- drawal: the Home Buyers' Plan, the   
   Lifelong Learning Plan and the RRSP mortgage.   
      
   These strategies may not always make sense; however, com- pared to an   
   out-and-out withdraw- al, they usually do, since you have a chance to restore   
   the withdrawal to your RRSP without penalties.   
      
   The Home Buyers' Plan   
      
   If you are buying a home and need money, there is an alternative to a straight   
   with- drawal from your RRSP: the Home Buyers' Plan (HBP). Up to $25,000 can be   
   withdrawn tax-free under the plan, although it's important to note that it   
   only applies if you (   
   and your spouse, if married legally or common-law) are first-time home buyers.   
   A five-year look- back rule also applies - see below for more details.   
      
   Moreover, your RRSP con- tributions must remain in your RRSP for at least 90   
   days before you can withdraw them under the HBP, or they may not be deductible.   
      
   The withdrawal must be repaid in equal installments over 15 years; if a   
   minimum repayment for a year is not made, the shortfall is taxed on your   
   income.   
      
   The 15-year repayment peri- od commences in the second cal- endar year   
   following the year of the RRSP withdrawal, but pay- ments made in the first 60   
   days of a year count as repayments for the preceding year. For example, if you   
   make a withdrawal in 2014,   
    you must start making RRSP repayments under the HBP by March 1, 2017.   
      
   There's no specific restric- tion on "doubling up" on the withdrawal e.g.,   
   where a home is held in co-tenancy. For example, a husband and wife may   
   togeth- er withdraw up to $50,000 (up to $25,000 each).   
      
   Generally speaking, those eligible for the plan will have:   
      
   Never participated in the program before;   
   Signed an agreement to build or purchase a qualifying home;   
   Bought or built the home (or a replacement property) by October 1 of the year   
   following the year in which they've received the funds from the RRSP   
   (extensions are available in some instances);   
   Intentions to occupy the home as their principal place of residence within one   
   year of buying or building the home.   
   Finally, a "look-back" rule prohibits ownership of an owner-occupied home by   
   you or your spouse (including a common-law spouse) for a period of five years   
   or so.   
      
   Essentially, you are not considered a first-time home buyer if, at any time   
   during the period beginning January 1 of the fourth year before the year of   
   the withdrawal and ending 31 days before the date of withdrawal, you or your   
   spouse or common-law    
   partner owned a home that you occupied as your principal place of residence.   
      
   There are some exceptions to the "first time home buyer" condition that apply   
   only if you are a person with a disability and require funds to acquire a home   
   to better suit your needs (or if you are doing so on behalf of a person with a   
   disability who is    
   related to you).   
      
   The big problem with the HPB? You could be caught in a cash-flow crunch that   
   may lead to tax penalties down the road. First, the cash-flow drain (due to   
   repayments) may impinge on your ability to make your regular, tax-deductible   
   RRSP contributions in    
   the future. So, without the RRSP write-off, your tax bill could go up.   
      
   Worse still, if the required Home Buyers' Plan repayment - which is not   
   deductible - is not made on a timely basis, you'll suffer a further taxable   
   benefit.   
      
   Even harsher rules may apply if you pass away or cease to be a Canadian   
   resident. (Note: Restrictions apply to deductions for ordinary RRSP   
   contributions if made less than 90 days before the withdrawal.)   
      
   If you or your spouse are about to drop into a low tax bracket, possibly when   
   you retire from the workforce, the Home Buyers' Plan may make more sense.   
      
   For example, the taxable benefit from non-repayment may result in little or no   
   adverse tax consequences under these circumstances.   
      
   Having said this, participating in a Home Buyers' Plan is usually a better bet   
   than an out- right withdrawal from your plan, which is a straight add-on to   
   your taxable income in the year of withdrawal.   
      
   The Lifelong Learning Plan   
      
   Tax-free withdrawals from RRSPs are also allowed to sup- port what the   
   government calls "lifelong learning."   
      
   Taking a page from the Home Buyers' Plan, withdrawals of up to $10,000 per   
   year can be made from your RRSP (to a maximum of $20,000 over a four year   
   period) if you or your spouse is enrolled in a qualifying educational or   
   training program (normally full-    
   time for at least three months during the year).   
      
   Withdrawals are repayable to the RRSP over a period of 10 years in equal   
   installments; otherwise there will be a tax- able benefit.   
      
   Repayments must normally commence in the year following the last year of   
   full-time enrolment, or in the sixth year after the first withdrawal, if   
   earlier.   
      
   Is a Lifelong Learning withdrawal a good idea? The answer is similar to the   
   HBP. Having to fund RRSP repayments will, no doubt, interfere with your   
   ability to make regular, tax-deductible RRSP contributions.   
      
   This problem could come at a time when you're in a higher tax bracket than   
   when the RRSP withdrawal was made.   
      
   If this is the case, it often makes sense to pass up the "lifelong learning"   
   opportunity and make an ordinary taxable withdrawal from your RRSP to fund   
   education, then make a regular tax-deductible contribution when the workforce   
   is re-entered. The basic    
   personal exemption will now cover off $11,038 (for 2013) of taxable income,   
   not to mention tuition and education tax credits which may also be available   
   to shelter the withdrawal.   
      
   The RRSP Mortgage   
      
   The Home Buyers' and Life- long Learning Plans are not true loans. Rather, tax   
   penalties apply if you don't restore the funds to your RRSP within applicable   
   time limits. But the RRSP mortgage is.   
      
   You can take out a loan from your RRSP provided that it is insured by the CMHC   
   or a public mortgagor insurer (such as Genworth Financial Canada or AIG United   
   Guaranty Canada). This is an exception to the rule that an RRSP cannot hold   
   the mortgage of the    
   plan-holder or a family member.   
      
      
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