What Is the RDSP?

The Registered Disability Savings Plan (RDSP) is the Canadian federal government’s initiative in assisting individuals with disabilities.^ To become eligible for the RDSP, you must be a Canadian resident under 60 years of age and eligible for the Disability Tax Credit.*

Once an RDSP account is open, anyone with written permission can contribute to the program. Unlike the Registered Retirement Savings Plan (RRSP), there’s no limit on the annual contribution. The annual deadline for contribution is December 31 each year.

There is, however, a lifetime limit of $200,000. Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59 years of age.

Perhaps the biggest incentives for opening an RDSP are the RDSP grants and bonds programs.#

The RDSP Grant

The Government of Canada will pay matching grants of 300, 200, or 100 percent, depending on the beneficiary’s family income and the amount contributed. An RDSP can receive a maximum of $3,500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime. A grant can be paid into an RDSP on contributions made to the beneficiary’s RDSP by December 31 of the year the beneficiary turns 49 years old.

The RDSP bond

The government will pay income-tested bonds of up to $1,000 a year to low-income Canadians with disabilities, regardless of the amount contributed. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49 years old.

However, there’s a catch - the grants and bonds must remain in the RDSP for 10 years. Otherwise they will have to be repaid back to the government.

^ Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 146.4

*A person is eligible for the disability amount if a qualified practitioner certifies on Form T2201, Disability Tax Credit Certificate, that the individual has a prolonged impairment and been approved by Revenue Canada Agency.

# Canada Disability Savings Act, S.C. 2007 c. 35, s. 136

For more information, please contact Canada Revenue Agency or Human Resources and Skill Development Canada or visit www.disabilitysavings.gc.ca.

For general information on all federal programs, services and initiatives, contact Service Canada at 1-800 O-CANADA (1-800-622-6232).

Graphic courtesy of HRSDC, used for news summary reporting purposes, all rights reserved.

Note: Please keep in mind that this article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. The law may have changed since the publication of the article.