What happens if I miss a scheduled repayment under the Home Buyers' Plan?

If you miss a scheduled Home Buyers' Plan repayment, the missed amount isn't simply added onto next year's repayment or allowed to quietly carry forward. Instead, it gets included in your taxable income for the year you missed it. In effect, that year's shortfall turns into ordinary income, taxed at your regular rate, rather than staying inside the tax-deferred structure of your RRSP.

This is one of the most commonly misunderstood parts of the Home Buyers' Plan, because it's easy to assume a missed payment just gets pushed to the following year the way a missed loan payment might. It doesn't work that way: the Income Tax Act treats the shortfall as income in the year it was due, which can come as an unwelcome surprise at tax time if you weren't expecting the extra income. The required minimum repaid each year is set out in your Home Buyers' Plan repayment schedule, so keeping track of that schedule, and making at least the minimum repayment on time, is the simplest way to avoid this. If you've already missed a payment, understanding exactly which tax year the shortfall gets added to is worth sorting out before you file.