5 ways to unlock RRSP tax savings

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Spouses or common-law partners can each withdraw up to $60,000, for a combined total of $120,000. You generally will not qualify for an HBP withdrawal if either you or your spouse or common-law partner have owned a home in the past five years, and occupied it as a principal residence, although special rules may apply if you recently separated or divorced.

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You must generally repay the amount you borrowed in equal annual instalments over 15 years, beginning with the second calendar year after the year of withdrawal. (A temporary rule gave taxpayers who withdrew under the HBP between Jan. 1, 2022, and Dec. 31, 2025, a reprieve of five years after the withdrawal year before repayments have to begin).

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Lifelong Learning Plan

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Under the Lifelong Learning Plan (LLP), you can withdraw up to $10,000 per year, or $20,000 in total, to finance full-time education for you or your spouse or common-law partner. To qualify, the student must have been enrolled, or received a written offer to enroll, in a qualifying educational institution. Most Canadian universities and colleges and many foreign educational institutions qualify. You must repay amounts withdrawn under an LLP over a ten-year period, starting five years after the first withdrawal or two years after ceasing studies, whichever is earlier.

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Until funds that were borrowed under either the HBP or LLP are repaid into the RRSP, you forfeit any growth on the withdrawn funds. Since it may be more than 15 years before you are required to fully repay funds under these plans, this can have a serious impact on your retirement savings. Therefore, it generally makes sense to repay any borrowed funds as soon as possible. There are no penalties for repaying borrowed HBP or LLP funds to an RRSP before the required repayment date, so early repayment allows you to continue to maximize the tax benefits from investing within an RRSP as soon as possible.

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Convert some of your RRSP to a RRIF at age 65

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Finally, a quick reminder to those over 65. If you don’t have any pension income this year, consider transferring up to $14,000 on a tax-deferred basis (which is $2,000 per year times seven years from age 65 to age 71) of your RRSP to a RRIF. You can then withdraw $2,000 annually from your RRIF, from age 65 through age 71, to take advantage of the annual federal pension income credit.

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For 2026, the credit is worth a maximum of $280, which is $2,000 times the new, lowest federal tax bracket for 2026 of 14 per cent. Most provinces also offer parallel pension income credits, but the pension income amounts and credit rates vary by province.

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Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. [email protected].

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