RDSP — long-term savings plan for persons with disabilities
Registered Disability Savings Plans
Section 146.4 establishes the Registered Disability Savings Plan (RDSP), a tax-advantaged long-term savings plan for Canadians eligible for the Disability Tax Credit, with access to government grants and bonds.
Plain-language explanation
The Registered Disability Savings Plan (RDSP) under s.146.4 provides long-term financial security for Canadians with severe and prolonged disabilities. It combines tax-deferred growth with substantial government contributions.
Eligibility: You must be eligible for the Disability Tax Credit (DTC) under s.118.3 and be under age 60 when the plan is opened. You must be a Canadian resident and have a valid Social Insurance Number.
Lifetime contribution limit: $200,000 lifetime, with no annual contribution limit. Contributions are not tax-deductible.
Canada Disability Savings Grant (CDSG): The federal government contributes grants based on family income and contributions — up to $3,500/year for low-income families, $1,000/year for others. The lifetime grant limit is $70,000.
Canada Disability Savings Bond (CDSB): No contribution required. Low-income RDSP holders receive up to $1,000/year automatically. Lifetime bond limit is $20,000.
Withdrawals (Lifetime Disability Assistance Payments): Withdrawals must begin by the end of the year you turn 60, or can start earlier if you meet certain conditions (terminal illness, shortened life expectancy). Withdrawals of the investment income and government contributions are taxable in the beneficiary's hands. Contributions are returned tax-free. A "holdback" rule requires repayment of grants/bonds if you withdraw within 10 years of receiving them.
Example
Sarah, aged 25 with a disability, has a family income under $32,028. For each $1,500 she contributes to her RDSP, the government matches with $3,500 (CDSG) plus $1,000 (CDSB) automatically. Her $1,500 contribution generates $4,500 in government money — a 300% match.
Amendment history
Significant changes to this provision. Older versions help you understand rules that applied in prior tax years.
Budget 2023 removed the requirement to close an RDSP when DTC eligibility is lost temporarily, providing a five-year period to wait for DTC re-determination before closing the plan.
Common questions
What happens to the RDSP if the beneficiary loses DTC eligibility? +
If the beneficiary no longer qualifies for the DTC, the RDSP must be closed within a certain period. Closing the RDSP triggers a "10-year repayment rule" requiring repayment of grants and bonds received in the 10 years before closure. Investment growth is taxed in the beneficiary's hands.
Can parents open an RDSP for an adult child with a disability? +
Yes. A "plan holder" (parent, guardian, or the individual themselves if capable) opens the RDSP for the beneficiary. If the disabled adult lacks the capacity to enter into a contract, a legal guardian or authorized representative can be the plan holder.
Key terms
Related sections
Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 146.4. — Read the official text on Justice Canada
These summaries are for educational purposes only and do not constitute legal or tax advice. Speak with a CPA for advice on your specific situation.