Registered Disability Savings Plan (RDSP): Eligibility, Government Grants, Tax Benefits and Withdrawal Rules

For Canadians living with a disability—and their families—the Registered Disability Savings Plan (RDSP) can be one of the most valuable long-term financial planning tools available.

An RDSP allows money to grow on a tax-deferred basis and may qualify for up to $70,000 in Canada Disability Savings Grants and $20,000 in Canada Disability Savings Bonds. That means an eligible beneficiary could potentially receive as much as $90,000 from the federal government, in addition to private contributions and investment growth.

However, an RDSP is designed primarily for long-term savings. Contributions, withdrawals and government repayment rules must be carefully planned, particularly during the 10 years after grants or bonds are deposited.

This article explains who can open an RDSP, how contributions and government incentives work, the tax implications, transfer and rollover opportunities, and the rules for taking money out of the plan.

What Is a Registered Disability Savings Plan?

A Registered Disability Savings Plan is a registered savings account intended to help a person who qualifies for the Disability Tax Credit (DTC) save for their long-term financial security.

The beneficiary is the person with the disability who will ultimately receive payments from the plan. The plan holder is the person or organization that opens and manages the Registered Disability Savings Plan. Depending on the circumstances, the beneficiary and holder may be the same person or different people.

The main benefits of an Registered Disability Savings Plan include:

• Tax-deferred investment growth
• Potential government grants of up to $70,000
• Potential government bonds of up to $20,000
• No annual contribution limit, subject to a $200,000 lifetime limit
• The ability for parents, grandparents and others to contribute
• Possible protection of disability and income-assistance benefits
• Certain tax-deferred rollovers from an RESP, RRSP, RRIF or pension plan

Unlike an RRSP, an RDSP contribution does not generate a tax deduction. Its main benefits are government assistance and the ability to defer tax on investment income until money is withdrawn.

Who Is Eligible for an Registered Disability Savings Plan?

To be named as the beneficiary of a new RDSP, the individual must generally:

1. Be approved by the CRA for the Disability Tax Credit;
2. Be a resident of Canada when the plan is opened;
3. Have a valid Social Insurance Number; and
4. Open the plan by December 31 of the year in which they turn 59.

All of these conditions must be met.

The DTC is therefore the gateway to the RDSP. A person does not automatically qualify for an RDSP merely because they receive provincial disability assistance, have a medical diagnosis or have private disability insurance.

Anyone who may qualify should consider applying for the DTC as early as possible. Retroactive DTC approval may also create access to unused RDSP grants and bonds for prior eligible years, subject to the 10-year carry-forward rules.

Who Can Open and Manage the Plan?

The person who opens and manages the RDSP is called the holder.

For a beneficiary under the age of majority, the holder may generally be:

• A parent;
• A guardian, tutor or other legally authorized representative; or
• An authorized public department, agency or institution.

An adult beneficiary who is contractually competent will generally open and hold their own RDSP.

Where an adult beneficiary cannot legally enter into a contract, a legally authorized representative may act as the holder. In certain situations involving uncertainty over contractual capacity, a qualifying family member may also be permitted to open the plan, subject to the applicable federal and provincial rules.

A beneficiary may only have one RDSP at a time, and an RDSP may have only one beneficiary.

Who Can Contribute to a Registered Disability Savings Plan?

Anyone may contribute to an RDSP with the holder’s written permission. This could include:

• The beneficiary;
• Parents or grandparents;
• Other family members;
• A trust;
• Friends; or
• Another person supporting the beneficiary.

Contributions may generally be made until December 31 of the year in which the beneficiary turns 59.

There is no annual contribution limit, but there is a $200,000 lifetime contribution limit for each beneficiary. Contributions and certain rollover amounts count toward this lifetime limit.

Private contributions are not tax-deductible to the contributor and do not create an income inclusion for the beneficiary when contributed.

Do Not Automatically Contribute the Maximum

The fact that there is no annual limit does not mean that making a large contribution is always the best strategy.

Government matching generally applies only to a limited amount of annual contributions. Contributions above the amount required to obtain the available grant are considered unassisted contributions and will not receive additional matching.

Before contributing, the holder should review the beneficiary’s annual Statement of Entitlement, which shows the available grant room and the contribution required to receive it.

Canada Disability Savings Grant

The Canada Disability Savings Grant is a matching payment deposited by the federal government into an eligible RDSP.

The matching rate depends on:

• The beneficiary’s adjusted family net income;
• The amount contributed; and
• Any unused grant entitlement carried forward from previous years.

The maximum regular grant is:

• $3,500 per year, excluding catch-up grants; and
• $70,000 over the beneficiary’s lifetime.

Grants are available on qualifying contributions made by December 31 of the year in which the beneficiary turns 49.

2026 Grant Matching Rates

For 2026, where adjusted family net income is $117,045 or less:

RDSP contribution	Government grant
First $500	$3 for every $1 contributed, up to $1,500
Next $1,000	$2 for every $1 contributed, up to $2,000
Total $1,500 contribution	Maximum regular grant of $3,500

Where adjusted family net income is more than $117,045, the government generally matches the first $1,000 of contributions at a rate of $1 for every $1 contributed, providing a maximum regular annual grant of $1,000.

These thresholds are indexed annually. The 2026 grant is based on family income reported on the beneficiary’s 2024 tax return.

Example

Suppose an eligible adult beneficiary has family income below the 2026 threshold and contributes $1,500:

• The first $500 attracts a $1,500 grant;
• The next $1,000 attracts a $2,000 grant; and
• The total government grant is $3,500.

The RDSP receives $5,000 in total from a $1,500 private contribution, before considering future investment growth.

Canada Disability Savings Bond

The Canada Disability Savings Bond is available to beneficiaries with lower family income.

Unlike the grant, no personal contribution is required to receive the bond.

The maximum bond is:

• Up to $1,000 per year; and
• Up to $20,000 over the beneficiary’s lifetime.

Bonds may be paid until December 31 of the year in which the beneficiary turns 49.

2026 Bond Income Thresholds

For 2026:

Adjusted family net income	Potential bond
$38,237 or less	$1,000
Between $38,237 and $58,523	A partial bond
$58,523 or more	No bond

The bond amount gradually decreases as income increases within the middle range. The 2026 bond is based on family income reported for 2024.

A low-income beneficiary should therefore consider opening an RDSP even when they or their family cannot afford to contribute. Simply opening the account, filing the required tax returns and applying for the bond may generate substantial government assistance.

Which Family Income Is Used?

The family-income calculation changes as the beneficiary gets older.

Until December 31 of the year the beneficiary turns 18, grant and bond eligibility is generally based on the income of the beneficiary’s parents or guardians.

Beginning in the year the beneficiary turns 19, eligibility is generally based on:

• The beneficiary’s own income; plus
• The income of their spouse or common-law partner, if applicable.

To ensure the correct grants and bonds are received after age 18, the beneficiary should file a personal income tax return every year, even where they have little or no taxable income. CRA guidance recommends beginning this annual filing in the year the beneficiary turns 17.

Carrying Forward Unused Grants and Bonds

Unused grant and bond entitlement may generally be carried forward for up to 10 years, provided the beneficiary met the applicable requirements during those years, including DTC approval and Canadian residency.

This rule may be particularly valuable where:

• The beneficiary recently received retroactive DTC approval;
• The RDSP was not opened when the beneficiary first qualified;
• The family could not make contributions in previous years; or
• The beneficiary was eligible for bonds that were never received.

The maximum grant that can be paid in a catch-up year is generally $10,500.

The maximum bond that can be paid in a catch-up year is generally $11,000, representing up to 10 prior years plus the current year. No contribution is required to receive catch-up bonds.

However, the carry-forward period is a moving 10-year window. Waiting too long may cause older entitlement years to expire. Grant and bond catch-up must also be completed before the end of the year in which the beneficiary turns 49.

Planning Tip

Do not guess the contribution needed to catch up.

Each February, the beneficiary should generally receive a Statement of Entitlement showing:

• Available grant entitlement;
• The amount that should be contributed to obtain it; and
• Any carry-forward amounts available.

A planned, multi-year contribution strategy may produce more government assistance than making one large, unplanned deposit.

Tax Treatment of an Registered Disability Savings Plan

Contributions

Private RDSP contributions are made with after-tax funds and are not deductible to the contributor.

Income Earned Inside the Plan

Interest, dividends and capital gains earned inside the RDSP are not taxed annually. Investment income grows on a tax-deferred basis while it remains in the account.

This can create significant long-term compounding, particularly when the plan receives government grants and bonds at a young age.

Withdrawals

When money is withdrawn, the payment generally contains both taxable and non-taxable portions.

The following amounts are generally taxable to the beneficiary:

• Canada Disability Savings Grants;
• Canada Disability Savings Bonds;
• Investment income and growth; and
• Certain rollover amounts.

The portion representing a return of private contributions is generally not taxable because those contributions were made with after-tax money.

The beneficiary cannot normally choose to withdraw only private contributions. Each withdrawal is calculated using prescribed rules and may contain both taxable and non-taxable amounts.

Because the taxable portion is normally reported by the beneficiary, an RDSP may be particularly tax-efficient where the beneficiary has relatively low taxable income when withdrawals begin.

Does a Registered Disability Savings Plan Affect Government Benefits?

Federal rules generally protect RDSP payments when calculating several income-tested federal benefits. RDSP income is generally excluded when determining entitlements such as:

• The GST/HST credit;
• The Canada Child Benefit;
• Certain social benefit repayments; and
• The Old Age Security recovery tax.

Provincial disability-assistance rules vary. In British Columbia, RDSP assets and payments are generally exempt for provincial disability-assistance purposes, but the beneficiary should confirm the rules applicable to their circumstances before making significant withdrawals.

How Registered Disability Savings Plan Withdrawals Work

There are two principal types of RDSP payments:

Disability Assistance Payment

A Disability Assistance Payment, or DAP, is a lump-sum payment made to the beneficiary when permitted by the plan.

Lifetime Disability Assistance Payment

A Lifetime Disability Assistance Payment, or LDAP, is a recurring payment that, once started, must generally continue at least annually until the beneficiary dies or the plan is terminated.

LDAPs must begin no later than the end of the year in which the beneficiary turns 60. Annual payment limits may apply based on a statutory formula using the value of the plan and the beneficiary’s age.

The 10-Year Repayment Rule

The most important RDSP withdrawal restriction is commonly called the 10-year rule or the assistance holdback rule.

When a withdrawal is made, the plan may be required to repay some or all grants and bonds paid during the previous 10 years.

Under the proportional repayment rule, the plan generally repays $3 of grant and bond for every $1 withdrawn, up to the assistance holdback amount.

For example, if a beneficiary withdraws $2,000 while grants and bonds from the previous 10 years remain in the plan, the RDSP may be required to repay as much as $6,000 to the government.

This means an early withdrawal can cost significantly more than the cash the beneficiary receives.

If the plan is closed or the beneficiary dies, grants and bonds deposited during the applicable 10-year period may also have to be repaid.

Practical Planning Point

Before making a withdrawal, ask the financial institution to confirm:

• The available withdrawal amount;
• The taxable and non-taxable portions;
• The grants and bonds that must be repaid;
• The assistance holdback amount; and
• Whether waiting would reduce the repayment.

An RDSP should not normally be treated as an emergency savings account, especially while recent government assistance remains subject to repayment.

Beneficiaries With a Shortened Life Expectancy

Special rules may apply where a medical doctor or nurse practitioner certifies that the beneficiary is not expected to live longer than five years.

The holder may be able to elect for the RDSP to become a Specified Disability Savings Plan, or SDSP. This may permit withdrawals under more flexible rules and avoid the normal repayment of the assistance holdback amount, subject to annual limits and other conditions.

Professional advice should be obtained before making the election because it changes how the plan operates.

What Happens If the Beneficiary Loses DTC Approval?

Loss of DTC approval no longer automatically requires the RDSP to be closed.

However, while the beneficiary is not DTC-approved:

• New private contributions are generally not allowed;
• New grants and bonds cannot be paid; and
• Certain rollover opportunities are subject to a deadline.

Existing funds may generally remain invested in the plan. The beneficiary does not have to repay grants and bonds solely because DTC approval was lost.

Withdrawals may still be made, but a withdrawal before the year the beneficiary turns 60 may trigger repayment of grants and bonds paid in the 10 years preceding the loss of DTC approval.

If DTC approval is later restored, the RDSP can generally resume normal operations.

Beneficiaries with temporary DTC approval should monitor the expiry date shown on their CRA notice and apply for renewal early where appropriate.

Transferring a Registered Disability Savings Plan to Another Financial Institution

An RDSP may be transferred from one financial institution to another, but it must remain for the same beneficiary.

Generally:

• The transfer must be made directly between the financial institutions;
• All holders of the existing plan must consent;
• All property must be transferred;
• The original RDSP must be closed after the transfer; and
• The beneficiary cannot maintain two active RDSPs.

A direct transfer does not count as a new contribution and does not reduce the beneficiary’s remaining $200,000 contribution limit.

The holder should not withdraw the funds personally and then redeposit them. Doing so could create tax consequences, trigger government-assistance repayments and potentially cause the new deposit to be treated as a contribution.

Rollovers From Other Registered Plans

In limited circumstances, amounts may be transferred to an RDSP on a tax-deferred basis.

Rollover of a Deceased Parent’s or Grandparent’s Retirement Savings

Qualifying amounts from a deceased person’s:

• RRSP;
• RRIF;
• Registered pension plan;
• Specified pension plan; or
• Pooled registered pension plan

may be rolled over to the RDSP of a financially dependent child or grandchild with a physical or mental impairment.

The rollover generally:

• Does not immediately create taxable income where the reporting requirements are met;
• Counts toward the RDSP’s $200,000 lifetime limit;
• Does not qualify for a Canada Disability Savings Grant; and
• Will generally form part of the taxable portion of future RDSP withdrawals.

The transaction is normally documented using Form RC4625 or equivalent documentation provided by the financial institution.

RESP-to-RDSP Rollover

Accumulated investment income from a RESP may be eligible for rollover to an RDSP where specified conditions are met, including situations where the RESP beneficiary has a severe and prolonged impairment that prevents them from reasonably pursuing post-secondary education.

A RESP rollover does not qualify for an RDSP grant, reduces the remaining $200,000 RDSP limit and will generally be taxable when later paid to the beneficiary.

Families should compare the rollover with other RESP withdrawal or transfer options before proceeding.

What Happens When the Beneficiary Dies?

Following the beneficiary’s death, grants and bonds paid into the RDSP during the applicable assistance holdback period must generally be repaid to the government.

After repayment and payment of any outstanding obligations, the remaining RDSP property is generally paid to the beneficiary’s estate.

The beneficiary’s will and estate plan should therefore be coordinated with the RDSP. Families should not assume that the RDSP passes directly to a named family member in the same way as an insurance policy or an account with a successor-holder designation.

Registered Disability Savings Plan Planning Strategies

1. Apply for the DTC Early

DTC approval is required before an RDSP can be opened. Early approval may preserve access to more years of grants and bonds.

2. Open the RDSP Even If You Cannot Contribute

A low-income beneficiary may qualify for bonds without making any contribution. Delaying the account opening may unnecessarily delay government payments.

3. File Tax Returns Every Year

The beneficiary should file an annual tax return even with no income. Missing returns can prevent or delay the calculation of grants and bonds.

4. Contribute Only What Is Needed for the Available Grant

For many beneficiaries below the regular income threshold, a $1,500 annual contribution obtains the maximum regular $3,500 grant. A larger contribution will not necessarily generate more matching assistance.

5. Review Carry-Forward Entitlement

A person with retroactive DTC approval may have substantial unused grant and bond entitlement. Review the annual Statement of Entitlement before contributing.

6. Avoid Unplanned Early Withdrawals

A small withdrawal may trigger repayment of three times that amount in recent grants and bonds. Request a repayment calculation before withdrawing.

7. Invest According to the Time Horizon

An RDSP opened for a young beneficiary may have several decades to grow. Holding the entire balance in cash may result in lost long-term growth, although the investment mix should reflect the beneficiary’s risk tolerance, expected expenses and withdrawal timeline.

8. Coordinate the Registered Disability Savings Plan With Estate Planning

Parents and grandparents should consider the RDSP when preparing their wills, beneficiary designations, trusts and life-insurance arrangements.

A large direct inheritance may affect income-tested programs in ways that a properly planned RDSP contribution, rollover or disability trust might not.

9. Monitor the DTC Expiry Date

Where DTC approval is temporary, begin the renewal process before the eligibility period ends to reduce interruptions to contributions and government assistance.

Is a Registered Disability Savings Plan Right for You or Your Family?

An RDSP can provide exceptional long-term value, particularly where the beneficiary qualifies for enhanced grants, bonds or retroactive government assistance.

However, the best strategy depends on:

• The beneficiary’s age;
• DTC eligibility period;
• Family income;
• Available contribution funds;
• Unused grant and bond entitlements;
• Expected future expenses;
• Provincial disability benefits;
• Investment horizon;
• Estate-planning objectives; and
• The timing of future withdrawals.

A properly structured RDSP contribution plan may produce tens of thousands of dollars in government assistance. An unplanned withdrawal or rollover, on the other hand, may trigger unnecessary repayments or tax.

Finsight CPA can assist individuals and families with DTC and RDSP-related tax planning, reviewing carry-forward opportunities, coordinating contributions with other registered plans, and assessing the tax implications of withdrawals and estate-planning arrangements.

CRA and Government of Canada Resources

• CRA — Registered Disability Savings Plan overview
• CRA Guide RC4460 — Registered Disability Savings Plan
• Government of Canada — RDSP program overview
• Government of Canada — Who can open an RDSP
• Government of Canada — Grant and bond amounts
• CRA — RDSP contribution limits, transfers and rollovers
• CRA Form RC4625 — Rollover to an RDSP under paragraph 60(m)
• CRA Form RC435 — Rollover from an RESP to an RDSP
• CRA — Apply for the Disability Tax Credit