How to Withdraw Money From an RRSP Under the Lifelong Learning Plan

How the Lifelong Learning Plan works

The Lifelong Learning Plan (LLP) is a federal tax measure that lets eligible individuals withdraw money from their Registered Retirement Savings Plans to finance qualifying education or training without having the eligible withdrawal included in income at the time it is made.

You can use the LLP for your own education or training or that of your spouse or common-law partner. You cannot use it to finance education or training for your child or your spouse's or common-law partner's child.

The LLP is different from student financial aid and an RESP. It uses money already held in your RRSP and creates a balance that generally must later be repaid. If you are looking for government grants and loans rather than an RRSP withdrawal, see Helpydo's guide to applying for student financial aid, grants and loans in Canada.

How much can you withdraw under the LLP?

You can withdraw up to $10,000 from your RRSPs in a calendar year under the Lifelong Learning Plan. Across one participation period, your total LLP withdrawals cannot exceed $20,000.

The amount you withdraw does not have to equal your tuition or other education expenses. The LLP limits the amount withdrawn from the RRSP rather than reimbursing a specified percentage of tuition.

Your spouse or common-law partner can also participate if eligible. Each of you can withdraw up to the applicable $10,000 annual and $20,000 total limits.

What happens if you withdraw more than the LLP limit?

An amount exceeding the $10,000 annual LLP limit is included in your income for the year of withdrawal. An amount exceeding the $20,000 total LLP limit is also included in income for the year in which the total limit is exceeded.

Eligible amounts within the LLP limits are not included in your income when withdrawn, and your RRSP issuer does not withhold tax on those eligible amounts.

Who can use the Lifelong Learning Plan?

You can generally participate if you are an RRSP annuitant and a resident of Canada when you receive the funds from your RRSP. You cannot participate after the end of the year in which you turn 71.

The person studying, called the LLP student, can be:

• you; or
• your spouse or common-law partner.

Your child cannot be designated as the LLP student, and neither can your spouse's or common-law partner's child.

What kind of education or training qualifies?

The LLP student generally must enrol full-time in a qualifying educational program at a designated educational institution.

If the student is not already enrolled when you make the withdrawal, the student must have received a written offer from a designated educational institution to enrol before March of the year following the LLP withdrawal. The CRA states that a conditional written offer is acceptable.

The educational institution determines whether a student is considered full-time or part-time. Distance education and correspondence courses can satisfy the qualifying educational program requirement, but the separate full-time enrolment condition still generally applies.

Can a part-time student qualify?

Yes, in a specific circumstance. An LLP student who meets the CRA's disability conditions can be enrolled part-time. The program must still be a qualifying educational program.

The CRA considers the disability condition satisfied in specified circumstances, including where the student cannot reasonably be expected to enrol full-time because of a mental or physical impairment supported by a signed statement from an eligible medical professional, or where the student is entitled to the disability amount under the applicable tax rules.

Use Form RC96 for every RRSP withdrawal

To withdraw RRSP funds under the LLP, use Form RC96, Lifelong Learning Plan (LLP) Request to Withdraw Funds from an RRSP. You need a separate RC96 for each withdrawal.

1. Complete Part 1 of Form RC96.
2. Identify yourself or your spouse or common-law partner as the LLP student.
3. Give the completed form to your RRSP issuer.
4. The RRSP issuer completes Part 2 and processes the withdrawal.

The form is not an application for the CRA to send you money. The funds come from your own RRSP, and the completed RC96 is provided to the financial institution or other issuer that administers that RRSP.

What tax documents do you receive after withdrawing?

Your RRSP issuer sends you a T4RSP Statement of RRSP Income showing the LLP withdrawal in box 25.

Starting in the year of your first LLP withdrawal, you must file an income tax and benefit return every year until all LLP withdrawals have been repaid or included in income. This requirement applies even if you owe no tax and make no LLP repayment for that year.

Complete Schedule 7, RRSP, PRPP and SPP Contributions and Transfers, and HBP or LLP Activities, with your tax return to report LLP withdrawals and repayments. If your spouse or common-law partner is the LLP student, the CRA instructs you to indicate this on Schedule 7 using box 26400.

How long can you keep making LLP withdrawals?

Provided the LLP conditions continue to be met, additional withdrawals can generally be made until the earlier of:

• the start of your LLP repayment period; or
• January of the fourth calendar year after the year of your first LLP withdrawal.

You cannot make additional LLP withdrawals after your repayment period begins. Once your previous LLP balance reaches zero, you can participate again beginning in the following year and start a new participation period, provided you meet the conditions.

Watch the 90-day RRSP contribution rule

Do not assume you can open an RRSP, immediately contribute money and then withdraw the same funds through the LLP while preserving the RRSP deduction.

The CRA applies special rules to contributions made shortly before an LLP withdrawal. If you contribute to an RRSP during the 89-day period immediately before the withdrawal, some or all of that contribution may not be deductible, depending on the value remaining in the RRSP immediately after the withdrawal.

If you do not already have an RRSP, the CRA states that you cannot set one up and immediately make an LLP withdrawal while obtaining the expected deduction; the contribution must have been in the RRSP for 90 days before it can be deductible under these rules.

Can you withdraw from every type of registered retirement plan?

No. LLP withdrawals are made from eligible RRSPs. The CRA states that you cannot withdraw LLP funds from a pooled registered pension plan (PRPP), specified pension plan (SPP), or locked-in RRSP.

PRPP and SPP contributions can, however, be designated as repayments of an existing LLP balance when the applicable repayment rules are met.

How do you repay the Lifelong Learning Plan?

LLP withdrawals generally must be repaid over a period of 10 years. Normally, the required repayment for each year of that period is one-tenth of the total amount withdrawn, adjusted as the balance and remaining repayment period change.

You make a repayment by contributing to your RRSP, PRPP or SPP in the repayment year or during the first 60 days of the following year and designating the appropriate amount as an LLP repayment on Schedule 7.

An amount designated as an LLP repayment is not deductible as an ordinary RRSP contribution. You can make the required repayment even if your RRSP deduction limit is zero or negative.

When do repayments start?

The exact start of your repayment period depends on the student's qualifying-student status. The CRA states that the latest you can start repaying is the fifth year after your first LLP withdrawal. Repayment can begin sooner when the LLP student stops being a qualifying student under the CRA's rules.

Your CRA LLP Statement of Account, provided with your notice of assessment or reassessment or available through your CRA account, shows your LLP balance, repayments and the amount required for the following year.

What happens if you do not make the required repayment?

If you designate less than your required LLP repayment for a year, the difference generally must be included in your income on line 12900 of your income tax and benefit return. Your LLP balance is reduced by both the amount actually repaid and the amount included in income.

What if the student does not start or continue the program?

If the student was not enrolled when you withdrew the money and does not enrol in the qualifying program by the required deadline, you generally must cancel the LLP withdrawal under the CRA's cancellation rules.

Additional rules apply when a student leaves the educational program after an LLP withdrawal. Whether cancellation is required depends on the timing and circumstances, so do not simply treat the withdrawal as an ordinary RRSP withdrawal without checking the CRA's LLP cancellation rules.

LLP vs. other ways to pay for education

The Lifelong Learning Plan is specifically for withdrawing your own RRSP savings for qualifying education or training. It is not a student loan or grant and does not replace other education-funding programs.

If the education is being funded from a Registered Education Savings Plan instead, see how to withdraw money from an RESP for post-secondary education. If you are paying eligible course or training fees personally, you may also want to review how the Canada Training Credit works.

Common mistakes to avoid

• Using the LLP for a child's education: the LLP student can only be you or your spouse or common-law partner.
• Withdrawing more than $10,000 in one calendar year: the excess is generally included in income.
• Exceeding the $20,000 participation-period limit: amounts above the total limit are generally taxable.
• Forgetting Form RC96: a separate RC96 is required for each LLP withdrawal.
• Assuming any part-time program qualifies: the LLP normally requires full-time enrolment; the part-time exception applies to students who meet specified disability conditions.
• Ignoring recent RRSP contributions: contributions made in the 89 days before the withdrawal can be affected by special deduction rules.
• Stopping tax returns after the withdrawal: you must continue filing annual returns until your LLP balance has been repaid or included in income.
• Forgetting to designate repayments: contributions intended as LLP repayments must be properly designated on Schedule 7.

What happens after the withdrawal?

Once your RRSP issuer processes an eligible RC96 request, you receive the requested funds without withholding tax on the eligible LLP amount. The issuer later reports the withdrawal on a T4RSP slip.

Your ongoing obligations then move to annual tax reporting and eventual repayment. Keep your RC96 documentation, T4RSP slips, educational records and CRA LLP statements so you can track the balance until it reaches zero.