What is an RDSP?
The Registered Disability Savings Plan (RDSP) is intended to assist eligible Canadians with disabilities and their families in saving for the long-term financial security of the person with a disability.
This unique savings program allows savings to grow in a tax-deferred environment. The RDSP is also eligible to receive government assistance in the form of grants totaling up to $70,000 and bonds totaling up to $20,000.
Key Features of the RDSP
- There is no annual contribution limit, but there is a lifetime limit of $200,000 for total contributions. Contributions can be made up until the end of the year the beneficiary turns 59. Investment income and capital gains remain tax-deferred while in the RDSP. Contributions are not tax-deductible.
- Contributions may be eligible for the Canada Disability Savings Grant (CDSG), which provides matching contributions of up to $3,500 annually until the end of the year the beneficiary turns 49 ($70,000 lifetime limit).
- The plan may also be eligible for the Canada Disability Savings Bond (CDSB), which pays up to $1,000 annually until the end of the year the beneficiary turns 49 to low-income families regardless of whether RDSP contributions are made ($20,000 lifetime limit).
- Withdrawals can be used for any purpose, as long as it is for the benefit of the person with the disability (the plan's beneficiary).
- The beneficiary must begin receiving payments from the plan by the end of the year he/she turns 60.
- The beneficiary can only have one RDSP.
- While taxes on growth in the plan are deferred, contributions to an RDSP are not tax deductible.
- Contributions into the plan can be made until the end of the year in which the beneficiary turns age 59.
- Anyone can contribute to the RDSP as a gift for the beneficiary with written consent from the plan holder.
Qualifying for the Canada Disability Saving Grant (CDSG)
Your annual RDSP contributions may qualify for matching grants based on the amount contributed and your total family income.
|On the first $500
||$3 for every $1 contributed
|On the next $1,000
||$2 for every $1 contributed
|On the first $1,000
||$1 for every $1 contributed
Be sure to seek the advice of an RBC advisor to ensure that your RDSP is appropriately integrated with your personal and financial goals, and that any government assistance and tax consequences are considered and optimized.
Qualifying for the Canada Disability Savings Bond (CDSB)
Regardless of whether RDSP contributions are made, lower income families may qualify for government assistance in the form of a bond.
|$24,863 or less
|Between $24,863 and $42,707
||$1,000 is reduced on a prorated basis
|More than $42,707 (or no income tax return)
||No bond is paid
*Family net income is based on the income of the parents until December 31 of the year the beneficiary reaches age 18 and on the family net income of the beneficiary (and their spouse) beginning the year the beneficiary reaches age 19.
Income amounts shown are for 2011 based on income tax returns filed for the 2009 tax year. Family income from 2 years prior is used for assessing a potential bond or grant. This means that beneficiaries will have to file tax returns beginning the year they reach age 17 if they wish to receive the maximum grant and bond in the year they reach age 19.
RDSP Withdrawals and Payments
- Withdrawals from the plan can be made anytime and for any purpose to the benefit of the beneficiary. However, withdrawals will result in the repayment of all CDSG and CDSB amounts paid into the plan in the previous 10 years, because the plan is intended to encourage long-term savings before withdrawals begin.
- Withdrawals include a blend of taxable and non-taxable amounts. Contributions are not included as taxable income when paid out of an RDSP. However, investment income and capital gains plus any CDSG and CDSB amounts in the plan are included in the beneficiary's income for tax purposes when paid out of the RDSP.
- The beneficiary must begin receiving regular payments from the plan by the end of the year he/she turns age 60. Once regular payments start they will continue for the life of the beneficiary.
- Payments do not affect eligibility for Federal Government benefits such as the GST credit and the Canada Child Tax Benefit. However, support payments or means-tested disability pensions received from the province where the beneficiary resides may be reduced or eliminated. Anyone opening an RDSP must consider and confirm, before the plan is funded, the potential impact on the beneficiary's support payments or government assistance. The contribution is irrevocable and cannot be recovered from the RDSP once paid.
Talk to an RBC advisor
An RBC advisor can show you how the Registered Disability Savings Plan may help provide long-term financial support for you or your loved one.
Book an appointment with an RBC advisor