A Registered Disability Savings Plan (RDSP) is a tax-deferred savings vehicle that provides long-term financial security for people living with a disability. It includes government incentives such as the Canada Disability Savings Grant (CDSG) and potentially the Canada Disability Savings Bond (CDSB) that can add up to an additional $90,000 per individual.
For many individuals with disabilities, ongoing financial support is often required. An RDSP is an effective tool that can help families manage the financial costs associated with having, or caring for, someone with a disability.
Who is eligible for an RDSP?
Canadian residents under the age of 60 with a valid SIN who are eligible for the Disability Tax Credit can open an RDSP.
Who can set up an account?
For beneficiaries under the age of majority, the holder can be a legal parent, legal representative or public department. For beneficiaries over the age of majority, the holder is generally the beneficiary. In certain circumstances, a guardian, legal representative or public department may be eligible to become the holder.
Who can contribute to an RDSP?
Anyone can contribute to an RDSP, provided they have written consent of the account holder.
Just like with RESP contributions, extended families including uncles, aunts Godparents and friends can help ensure the financial security of their loved ones by pitching in with an RDSP contribution.
Tax consequences with an RDSP
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.
Contributions that are withdrawn are not to be included as income for the beneficiary when paid out of an RDSP. However, the grant, bond and any investment income earned in the plan are included in the beneficiary’s income for tax purposes when paid out of the RDSP.
What is the contribution limit?
The contribution limit is up to $200,000 lifetime per individual over the life of the RDSP. There is no annual contribution limit.
The annual contribution deadline for Grants and Bonds is December 31st. The last day for Grants and Bond eligibility is December 31st of the year the beneficiary turns 49 years of age.
The last day that contributions are permitted to the plan is December 31st of the year the beneficiary turns 59 years of age.
Since its inception in December, 2008, the RDSP has helped thousands of families across Canada. By offering a tax-deferred environment for contributions to grow and matching federal contributions annually (up to 300%), the Registered Disability Savings Plan gives new financial security to families in need.