Registered Disability Savings Plan (RDSP)
A Registered Disability Savings Plan is a tax-deferred account intended for the long-term financial security of an individual with a disability. The RDSP is also eligible to receive up to $70,000 of Government grants over the life of the plan.
There is no annual contribution limit for the plan, however there is a lifetime contribution limit of $200,000. Contributions can be made until the end of the year the beneficiary turns 59.
Government Contributions
The Federal Government will provide matching contributions up to $3,500 per year until the end of the year the beneficiary turns 49. Government grants are subject to a lifetime maximum of $70,000.
Plan Withdrawals
Withdrawals can be made from an RDSP at any time, however, any Government grants received by the plan in the previous 10 years would be required to be paid back. Unlike an RRSP, withdrawals from an RDSP are only partly taxable. Any Government grants and investment income generated within the plan will be taxable in the hands of the beneficiary upon withdrawal. For example, if the RDSP plan has a balance of $100,000 ($60,000 of original contributions, and $40,000 of investment gains & Government grants) and a $10,000 withdrawal is made, $6,000 would be considered tax-free, and $4,000 would be taxable.
The beneficiary on the RDSP must begin to making withdrawals from the plan by the end of the year they turn 60.
Who is eligible
To qualify for an RDSP, the beneficiary of the plan must:
- Qualify for the disability tax credit. http://www.cra-arc.gc.ca/disability/
- Be a resident of Canada and have a valid Social Insurance Number
- Be under 60 years of age
To learn more about the Registered Disability Savings Plan, please contact us.
