4- Lifelong learning plan

Somewhat similar to the HBP (see Section II), taxpayers can make tax-free withdrawals from their RRSPs (other than a locked-in RRSP or an IPP) to finance full-time education for themselves or their spouses. An eligible training program must last at least three months at an accredited institution. A disabled student who is registered part-time is also eligible.

Even though only one spouse is going back to school, both spouses may withdraw amounts from their RRSP as part of the Lifelong Learning Plan.

Withdrawals may not exceed $10,000 in a year and a total of $20,000 for four calendar years. Withdrawals are repayable, without interest, in equal instalments over a period of 10 years. The first instalment is due no later than 60 days after the fifth year following the year of the first withdrawal. An individual may take advantage of this program as many times as he/she wants after all previous withdrawals have been repaid.

Special rules provide for earlier repayment if the taxpayer is not a full-time student for at least three months in each of two consecutive years in the four-year period following the year of the first withdrawal.

Many features of the program resemble those of the HBP. For example, contributions made to the taxpayer’s RRSP or that of his/her spouse in the 89 days preceding a withdrawal may not be deductible and any amount required to be repaid in a year, but which is not, must be included in the recipient’s income. Specific rules are provided, among other things, if the beneficiary dies or leaves Canada.

A taxpayer who makes withdrawals within this program must file an income tax return for each year even if he/she has no income tax payable.