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How RDSP withdrawals work
If the beneficiary withdraws money from their RDSP, some or all of the grants and bonds that have been in the plan for less than 10 years, called the assistance holdback amount, must be repaid to the government. The beneficiary must repay $3 for every $1 that is taken out, up to a maximum of the assistance holdback amount.
There is an exception for beneficiaries with shortened life expectancies, which is described below.
Withdrawals don’t affect other government benefits
Withdrawals from an RDSP do not affect a beneficiary’s eligibility for:
- federal benefits like the HST credit and the Canada Child Tax Benefit, or
- provincial benefits in most provinces. Learn more about provincial rules for withdrawals.
The beneficiary doesn’t pay tax on the original contributions that are withdrawn from the RDSP.
The beneficiary will pay tax on:
- investment earnings that are withdrawn from the RDSP, and
- grants and bonds that are withdrawn from the RDSP and that have been in the RDSP for 10 years or more.
When you take money out of an RDSP, you’ll pay tax on any government grants or bonds, and investment earnings, but not on your contributions.
If the beneficiary’s life expectancy is 5 years or less
If the beneficiary’s life expectancy is 5 years or less, the beneficiary can withdraw up to $10,000 a year in taxable savings from their plan:
- If any of that money is from grants and bonds that have been paid into the plan in the last 10 years, the beneficiary won’t have to repay these amounts to the government.
- The beneficiary can also withdraw a pro-rated amount of their plan contributions.
Learn more about RDSP withdrawal rules.
In general, if you withdraw money from your RDSP, you must repay some or all of the grants and bonds that have been in the plan for less than 10 years.