A Registered Disability Savings Plan (RDSP) is set up through the Federal Government for a long-term savings plan to help Canadians with disabilities and their families save for the future. Other grants and bonds may also be available to RDSP holders.
Advantages of contributing to an RDSP
Canadians under 60 who qualify for the Disability Tax Credit can become a beneficiary of an RDSP.
A parent, legal guardian or a legally authorized individual to act on behalf of the beneficiary may open an RDSP, however, anyone can make contributions with the written consent of the plan holder.
Opening an RDSP will not reduce or otherwise affect the beneficiary’s other government benefits.
Contributions to an RDSP are NOT tax deductible and can be made up until the end of the year the beneficiary turns 59.
Contributions of any amount can be made annually up to a lifetime contribution of $200,000.00.
The Canada Savings Grant is a great way to grow an RDSP. Depending on your household income, the federal government will match every $1 saved, with up to $3, with a lifetime maximum of $70,000.00.
Beneficiaries in the low income tax bracket can also take advantage of the Canada Disability Savings Bond. The federal government will invest $1000 each year for 20 years to help grow your savings. Lifetime maximum of $20,000.00
RDSP withdrawals can be spent however the beneficiary chooses, whether it is to further their education, purchase a home or simply living expenses.
Withdrawals are not included as income to the beneficiary when they are paid out of an RDSP. However, the Canada disability savings grant, the Canada disability savings bond, investment income earned in the plan, and the proceeds from rollovers will be included in the beneficiary’s taxable income taxes when they are paid out of the RDSP.