RRSP Home Buyers’ Plan (HBP) and Lifelong Learning Plan (LLP): How to Borrow From Your RRSP Without Paying Tax — CPA Montreal Near You Explains

Introduction

Many Canadians don’t realize they can withdraw money from their RRSP tax-free under two special programs: the Home Buyers’ Plan (HBP) and the Lifelong Learning Plan (LLP). These programs allow individuals to access retirement savings to buy a first home or fund education without triggering immediate tax. However, both programs have strict qualification rules, repayment schedules, deadlines, and CRA compliance requirements. Failing to follow the rules can cause the withdrawal to become taxable, leading to a large unexpected tax bill. This guide explains how HBP and LLP work, who qualifies, how repayment schedules operate, and how to avoid common mistakes.

What Is the RRSP Home Buyers’ Plan (HBP)?

The HBP allows eligible first-time homebuyers to withdraw up to $60,000 from their RRSP tax-free to buy or build a qualifying home. Key points include:
you must be considered a first-time homebuyer under CRA rules
funds must remain in the RRSP for at least 90 days before withdrawal
repayments must begin in the second year after withdrawal
repayment period is 15 years
Only individuals qualify; couples may each withdraw up to $60,000 for a combined $120,000.

Who Qualifies as a First-Time Homebuyer?

CRA considers you a first-time buyer if:
you did not occupy a home you owned in the past four years
you do not currently own the home you are buying/occupying
you are purchasing the home for yourself or a related person with a disability
The four-year rule confuses many taxpayers. Even if you owned a home in the past, you may still qualify if enough time has passed.

How RRSP Withdrawals Work Under HBP

The steps include:
ensure funds were contributed at least 90 days before withdrawal
complete CRA Form T1036 (request to withdraw)
withdraw up to $60,000 tax-free
use the funds for a qualifying home purchase by October 1 of the following year
No tax is withheld as long as HBP conditions are met.

HBP Repayment Requirements

Repayments:
start in the second year after withdrawal
are spread evenly over 15 years
must be designated when filing your tax return
If you fail to repay the minimum for a year, CRA adds that portion to your taxable income. Early repayment is allowed.

Common HBP Mistakes

withdrawing funds before 90 days
forgetting to designate repayments on tax return
missing repayment deadlines
buying a home that does not meet CRA’s “qualifying home” definition
improper documentation during an audit
These errors turn tax-free withdrawals into taxable income.

What Is the Lifelong Learning Plan (LLP)?

The LLP allows Canadians to withdraw up to $10,000 per year, up to a lifetime maximum of $20,000, from their RRSP to fund full-time education for themselves or a spouse. LLP is ideal for:
career transitions
university or college programs
professional certifications
post-secondary retraining
LLP funds must support educational enrollment in recognized programs.

LLP Qualification Rules

To qualify, the student must:
be enrolled full-time at a designated educational institution
maintain enrollment during the period of withdrawal
meet CRA eligibility conditions
Funds cannot be used for children’s education.

How LLP Withdrawals Work

Withdrawals:
must be made using CRA Form RC96
are tax-free as long as LLP conditions are met
can be spread across multiple years
unused LLP room cannot be transferred to another person
LLP withdrawals do not affect RRSP contribution room.

LLP Repayment Requirements

Repayments begin:
in the fifth year after the first LLP withdrawal, or
in the second year after the student stops qualifying
Repayment period is typically 10 years. Missed repayments are added to taxable income.

Differences Between HBP and LLP

HBP is for home purchases
LLP is for education
HBP has a 15-year repayment period, LLP has 10 years
HBP requires first-time homebuyer status, LLP requires full-time education
Both programs allow tax-free withdrawals but impose strict repayment schedules

When Not to Use HBP or LLP

Avoid withdrawals if:
you are close to retirement and cannot replenish RRSPs
you are in a high-income year (future repayments offer no deduction)
you have insufficient cash flow to make repayments
the withdrawal will compromise long-term retirement planning
Taxpayers often underestimate the long-term impact of reduced RRSP growth.

CRA Audit Considerations

CRA may review:
proof of home purchase
withdrawal timing
repayment records
education enrollment records
RRSP contribution history
Incorrect documentation can lead to reassessment and taxes owing.

Planning Tips to Maximize Benefits

ensure RRSP contributions remain in the account at least 90 days before withdrawal
coordinate HBP withdrawals between spouses for maximum benefit
plan education schedules carefully to optimize LLP repayment timing
set up automatic repayments to avoid missed contributions
review RRSP strategy annually with a CPA
Proper planning makes withdrawals tax-efficient.

Mackisen Strategy

At Mackisen CPA Montreal, we help clients determine whether HBP or LLP withdrawals fit their financial goals, optimize RRSP strategies, structure repayment schedules, complete CRA forms, and avoid reassessments. We provide personalized planning for first-time homebuyers, returning students, and families balancing long-term tax savings.

Real Client Experience

A Montreal couple used dual HBP withdrawals to purchase their first home without tax consequences. A mature student returned to school using LLP funds strategically while minimizing repayment burden. A professional avoided an HBP reassessment by correcting repayment reporting. A homeowner restored first-time buyer status after careful four-year planning.

Common Questions

Are RRSP withdrawals taxable? Only outside HBP or LLP. Can HBP and LLP be used together? Yes but not for the same purpose. What if I miss a repayment? It becomes taxable income. Can I repay faster? Yes. Does CRA audit HBP and LLP? Frequently when documentation is missing.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Canadians navigate RRSP withdrawals, buy homes tax-efficiently, pursue education, and maintain full CRA compliance while optimizing long-term financial outcomes.