TaxTips.ca
 Canadian Tax and
Financial Information 		Payments Into an RDSP

Ads keep this website free for you.
 TaxTips.ca does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Looking for US tax information?
See USTaxTips.net

Need an accounting, tax or financial advisor? Look in our Directory.  Use above search box to easily find your topic!   Stay Connected with TaxTips.ca!

Home
What's New
Calculators
Personal Tax
Business
Sales Taxes
Free in 30!
Financial Planning
RRSP RRIF TFSA
Real Estate
Stocks Bonds etc.
Seniors
Disabilities
Canada
Alberta
British Columbia
Manitoba
Ontario
Quebec
Saskatchewan
Atlantic Provinces
Territories
Federal Budget
Provincial Budgets
Statistics etc.
Glossary
Site Map
Directory
Advertise With Us
Contact Us/About Us
Links & Resources



Financial Planning  ->  Disabilities  ->  RDSPs -> Payments into an RDSP

Payments into a Registered Disability Savings Plan (RDSP)

A registered disability savings plan (RDSP) will consist of the following:

bulletcontributions made by the holder
bulletCanada Disability Savings Grants (CDSGs)
bulletCanada Disability Savings Bonds (CDSBs) in some cases, and
bulletinvestment earnings

Only the contributions can be withdrawn tax-free by the beneficiary.  See taxable amount of disability assistance payments for more information.

Contributions to a Registered Disability Savings Plan (RDSP)

bullet The lifetime maximum for contributions to a registered disability savings plan (RDSP) is $200,000
bullet Contributions are permitted to be made until the end of the year in which the beneficiary turns 59.
bullet There is no annual limit for contributions.
bullet Contributions to an RDSP are not tax deductible.
bullet Investments in the RDSP grow tax-free.
bullet Contributions in kind can be made, by transferring investments into the RDSP.  This will result in a deemed disposal of the investments to the person making the transfer, triggering a capital gain or loss.  If this results in a capital loss, the loss will not be deductible (Income Tax Act s. 40(2)(g)(iv)(B)).  This is the same treatment as when investments are transferred into a registered retirement savings plan (RRSP).
bullet If funds are borrowed to contribute to an RDSP, the interest will not be tax deductible (Income Tax Act s. 18(11)(j)).

Contributions may not be made to the RDSP:

bullet in any year in which the beneficiary is not eligible for the disability amount tax credit, or
bullet after the death of the beneficiary

Payments into the RDSP by the federal government

Funds will be paid into the RDSP by the federal government, depending on the amount of contributions and family net income, in the form of

bullet Canada Disability Savings Grants (CDSGs), and
bullet in some cases Canada Disability Savings Bonds (CDSBs)

CDSG and CDSB carry forwards

RDSP beneficiaries are currently unable to carry forward unused Canada Disability savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) to future years.

The Federal 2010 Budget proposes to amend the Canada Disability Savings Act to allow a 10-year carry forward of CDSG and CDSB entitlements.  The carry forward will be available starting in 2011.  Plan holders will receive annual statements of CDSG entitlements.

For more information see the 2010 Budget website topic Carry forward of RDSP grants and bonds.

Canada Disability Savings Grants (CDSG)

Canada Disability Savings Act

The federal government will give Canada Disability Savings Grants to the RDSP, depending on family net income and annual contributions.  The lifetime limit for CDSG for any beneficiary is $70,000.

When the beneficiary of the RDSP is

bullet an individual who is at least 18 years of age, and less than 49 years of age, on December 31 of the preceding year, and whose family net income is less than or equal to $74,357(1) in the second preceding year
bullet a qualified dependent of an eligible individual whose adjusted income for calculation of the child tax benefit in respect of January is less than or equal to $74,357(1), or
bullet a person for whom a Children's Special Allowance is payable for at least one month in the year,

then the amount of CDSG paid in a year will be a maximum of $3,500, calculated as:

bullet 300% of the first $500 of contributions in the year, plus
bullet 200% of the next $1,000 of contributions in the year.

In any other case, the amount of the CDSG will be 100% of the total contributions in the year, to a maximum of $1,000.

(1)The family income amount of $74,357 is indexed for years after 2007.  For 2017 it is $91,831.  See the table below.

Note:  The Canada Disability Savings Act Regulations include provisions that an RDSP will be eligible to receive both CDSGs and CDSBs until the end of the year in which the plan beneficiary attains 49 years of age.  The Regulations also state that the beneficiary must be a DTC-eligible individual in the year in which the RDSP contribution is made (re CDSGs), or in the year in which the CDSB is payable.

Canada Disability Savings Bonds (CDSBs)

Canada Disability Savings Act

The federal government will also give CDSBs of up to $1,000 per year, to RDSPs established by low and modest-income families.  It is not necessary to make contributions to the RDSP in order to receive CDSBs.  The lifetime maximum CDSB limit is $20,000.

The amount of CDSBs given to an RDSP in a year will be $1,000, if the beneficiary of the RDSP is

bullet an individual who is at least 18 years of age, and less than 49 years of age on December 31 of the preceding year, and whose family net income is less than or equal to $30,000(1) in the second preceding year
bullet a qualified dependent of an eligible individual whose adjusted income for calculation of the child tax benefit in respect of January is less than or equal to $30,000(1), or
bullet a person for whom a Children's Special Allowance is payable for at least one month in the year

Where the family net income or adjusted income is greater than 30,000(1) but less than $45,916(1), the amount of the CDSB will be:

$1,000 - [$1,000 x (A - B) / (C - B)]

where

bullet A is the family net income or adjusted net income
bullet B is $30,000, and
bullet C is $45,916

In any other case, there will be no CDSB paid.

Example:  For family net income of $40,000, the CDSB for the year will be:

$1,000 - [$1,000 x ($40,000 - $30,000) / ($45,916 - $30,000)]

= $1,000 - [$1,000 x ($10,000 / $15,916)]

= $1,000 - [$1,000 x 0.628299] = $1,000 - $628.30

= $371.70

(1) The amounts of $30,000 and $45,916 are the amounts for 2017, indexed annually, and are the same as the National Child Benefit supplement thresholds.  See the following tables:

The following tables are reproduced from Department of Finance and Canada Revenue information, and updated for 2015 income levels.

Canada Disability Savings Grant (CDSG)
Matching Rates on Contributions

2017 Family Income (1)($)

up to 91,831

 over 91,831
300% on first $500 100% on first $1,000
200% on next $1,000  

Maximum Annual CDSGs and CDSBs

 

2017 Family Income (1) ($)
up to
30,000		 30,000 to
45,916		 45,916 to
91,831		 over
91,831
CDSG matching rate ($)
300% 1,500  1,500  1,500  nil 
200% 2,000  2,000  2,000  nil 
100% nil  nil  nil  1,000 
CDSB 1,000  500(2) nil  nil 
Total assistance $4,500  $4,000  $3,500  $1,000 

(1) These income thresholds are for 2017, and are indexed to inflation.  The lower 2 amounts are the same as the National Child Benefit (NCB) Supplement thresholds, and the higher amount is the taxable income above which the middle federal tax bracket begins.  The 2017 amounts can be found in the following Employment and Social Development Canada (ESDC) InfoCapsules:

    - InfoCapsule 10:  Canada Disability Savings Grant (CDSG)

    - InfoCapsule 8:  Canada Disability Savings Bond (CDSB)

(2) Average amount of CDSB, assuming even distribution of families over income range.

See also the Employment and Social Development Canada web page on CDSG Grants and Bonds.

Next:  Payments out of the RDSP

Back to RDSP main page

Revised: August 29, 2019

 

Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved.  See Reproduction of information from TaxTips.ca

Facebook  | Twitter  |  Monthly Newsletter Sign-up  What’s New E-mail Notification RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.