How to Cancel a Home Buyers' Plan Withdrawal if Your Home Purchase Falls Through

Can you cancel your HBP withdrawal if the home purchase falls through?

Yes, but only in circumstances allowed by the Canada Revenue Agency. If you withdrew money from your RRSP under the Home Buyers' Plan and did not buy or build a qualifying home or replacement property, you may be able to cancel your participation.

Cancellation is different from the normal HBP repayment process. A valid cancellation reverses the tax treatment of the withdrawal when the required amount is returned on time and the CRA cancellation requirements are completed.

If you have not yet made an HBP withdrawal and are researching the original process, see the separate guide to withdrawing RRSP money under the Home Buyers' Plan.

When does the CRA allow an HBP cancellation?

The CRA says you generally cannot cancel an HBP participation when you made the withdrawal and otherwise met all of the HBP conditions. Cancellation is available only in specified situations.

You may be able to cancel if:

• you did not buy or build a qualifying home or replacement property;
• you became a non-resident before buying or building the qualifying home or replacement property;
• you made the HBP withdrawal to help a specified disabled person acquire a home and that person did not buy or build the qualifying home or replacement property;
• you made the withdrawal to help a specified disabled person and you became a non-resident before that person bought or built the qualifying home or replacement property; or
• you participated under the HBP rules for a marriage or common-law partnership breakdown and failed the specific disposal and acquisition conditions described by the CRA.

If you became a non-resident only after a qualifying home was bought or built, you cannot cancel the HBP participation on that basis. The CRA applies special repayment rules instead.

Do you have to cancel if the original purchase falls through?

Not necessarily. The HBP rules recognize a replacement property. A replacement property must satisfy the same qualifying-home conditions.

Normally, the qualifying home or replacement property must be acquired or built before October 1 of the year after the year of your first HBP withdrawal. The CRA also recognizes an additional year in specified circumstances. For example, if you are acquiring a home and have another written agreement before the original October 1 deadline to acquire the qualifying home or a replacement property before October 1 of the second year after the withdrawal year, the extended deadline can apply.

If you will use a replacement property, the CRA instructs you to notify it by letter. The letter must provide your name, address and social insurance number, the address of the replacement property, and a statement that you intend to occupy the replacement property as your principal place of residence within one year after buying or building it.

This distinction matters: a failed first transaction does not automatically mean you should return the HBP money immediately. First determine whether you are still completing a qualifying purchase or build within the permitted replacement-property rules.

What is the deadline to repay the HBP withdrawal when the purchase fails?

If you are cancelling because you did not buy or build a qualifying home or replacement property, your cancellation payments are generally due by December 31 of the year after the year of your first HBP withdrawal.

If you obtained the permitted one-year extension but still did not buy or build the qualifying home or replacement property, the cancellation payments are due by December 31 of the second calendar year after the calendar year of your first HBP withdrawal.

These dates are cancellation-payment deadlines. They are different from the deadline for sending Form RC471 or a cancellation letter to the CRA.

Do different cancellation situations have different deadlines?

Yes. Do not assume that the failed-purchase deadline applies to every cancellation.

If you became a non-resident before acquiring the home

The cancellation payment is generally due by December 31 of the calendar year after the year of the first HBP withdrawal. If the one-year home-acquisition extension applies, the deadline extends to December 31 of the second calendar year after the first-withdrawal year.

However, if you are a non-resident when you file your income tax and benefit return for the year of the HBP withdrawal, the CRA says the deadline is the earlier of December 31 of the calendar year after the first-withdrawal year and the date you file that tax return.

If cancellation relates to a marriage or common-law partnership breakdown

Where the CRA's specific cancellation conditions for this situation are met, cancellation payments are due by December 31 of the second calendar year after the calendar year of the first HBP withdrawal.

Where do you return the HBP money?

Make the cancellation payment to an existing RRSP or a new RRSP in your own name.

The CRA states that an HBP cancellation payment cannot be made to a pooled registered pension plan (PRPP), a specified pension plan (SPP), your spouse's or common-law partner's RRSP, or your spouse's or common-law partner's SPP.

The cancellation payment is also not treated like an ordinary deductible RRSP contribution. Do not enter it as a contribution in Part A – Contributions of Schedule 7, and you cannot claim an RRSP deduction for the cancellation payment.

What do you send to the CRA?

After making the cancellation payment, complete Form RC471, Home Buyers' Plan (HBP) – Cancellation. The CRA provides both an accessible fillable PDF and a version that can be printed and completed by hand.

Instead of Form RC471, the CRA also permits a signed cancellation letter. The letter must include:

• the reason your HBP participation is being cancelled;
• your last name and first name;
• your complete address;
• your social insurance number; and
• your signature.

Whether you use Form RC471 or a letter, attach the receipts for your cancellation payments.

When must Form RC471 reach the CRA?

The completed Form RC471 or cancellation letter must be received by the CRA no later than 60 days after the date your cancellation payments are due.

This means there are two deadlines to track: first, the deadline for returning the HBP funds to your RRSP; second, the 60-day period for getting the cancellation documentation and receipts to the CRA.

Can you submit the cancellation online?

Yes. The CRA says the completed Form RC471 or cancellation letter and receipts can be submitted using your CRA account. You can also submit the package by mail.

If mailing, the correct tax centre depends on your residential address. The CRA currently directs residents of Ontario, Prince Edward Island, Newfoundland and Labrador, Yukon, Nunavut and the Northwest Territories, as well as residents of Montréal, Québec City, Laval, Sherbrooke, Gatineau and Longueuil in Quebec, to the Sudbury Tax Centre Pension Workflow Team.

Residents of Manitoba, Saskatchewan, Alberta, British Columbia, Nova Scotia and New Brunswick, as well as Quebec locations not assigned to Sudbury, are directed to the Winnipeg Tax Centre Pension Workflow Team. Check the current CRA cancellation page before mailing in case the routing information changes.

What happens if you cannot return all of the HBP money?

If you validly cancel and return the full HBP amount by the required deadline, the CRA states that the withdrawal will not be taxed.

If you do not return the full amount by the applicable deadline, the unrepaid portion must be included in your income on line 12900 of your income tax and benefit return for the year in which you made the HBP withdrawals.

This is different from simply carrying the unpaid cancellation amount forward as a normal future HBP repayment. The cancellation rules specifically require the unpaid portion to be included in income for the withdrawal year.

If the affected tax return has already been filed and needs to be corrected, see how to change a Canadian tax return after filing.

Do not cancel unless the CRA rules actually allow it

A failed or delayed transaction does not always qualify as a cancellation. The CRA gives an example involving a condominium still under construction: the participant returned the HBP funds and submitted RC471 even though she still intended to take possession when construction finished. The CRA treated that cancellation as invalid because she had not actually met a permitted cancellation situation.

An invalid cancellation can create significant consequences. The amount returned to the RRSP may instead be treated as a new RRSP contribution, potentially causing an excess-contribution issue if you do not have sufficient contribution room. A later HBP withdrawal can also be treated as an ordinary taxable RRSP withdrawal if the conditions for a new HBP participation are not met.

Before using RC471 solely because construction or closing has been delayed, check whether the original or replacement home can still satisfy the HBP acquisition rules.

Cancellation is not the same as regular HBP repayment

Under normal HBP participation, qualifying withdrawals are generally repaid over a period of up to 15 years. Cancellation is a separate procedure used only when a CRA-recognized cancellation situation occurs.

A cancellation payment is specifically returned under the cancellation rules and is not claimed as an RRSP deduction. By contrast, if your home purchase was completed and you remain a valid HBP participant, use the normal HBP repayment and reporting process rather than Form RC471.

Common mistakes to avoid

• Cancelling just because plans changed: the CRA permits cancellation only in specified circumstances.
• Ignoring the replacement-property option: a failed original purchase may not require cancellation if you can complete an eligible replacement purchase within the HBP rules.
• Paying the money to the wrong plan: cancellation payments must go to an existing or new RRSP in your own name, not a PRPP, SPP or your spouse's RRSP.
• Claiming an RRSP deduction: an HBP cancellation payment is not treated as a deductible RRSP contribution.
• Forgetting the receipts: attach the RRSP cancellation payment receipts to RC471 or your cancellation letter.
• Missing the 60-day paperwork deadline: the CRA must receive RC471 or the cancellation letter no later than 60 days after the payment due date.