If you are planning to return to school to enhance your existing skill set or even start a new career, the federal government’s Lifelong Learning Plan (LLP) can help.
The Lifelong Learning Plan is the sister program of the very popular Home Buyers’ Plan (HBP). Like the Home Buyers’ Plan, qualified LLP participants can withdraw funds from their RRSP on a tax-free basis. The LLP helps finance the education you or your spouse or common-law partner needs. It is important to note that the program is not an RESP substitute and as such, you can not use it to fund your or your spouse or common-law children’s education.
Under the Lifelong Learning Plan, the amount you are borrowing must be in your RRSP account for a minimum of 90 days prior to the withdrawal. The program allows you to withdraw up to $10,000 per calendar year to a total of $20,000 over four consecutive years ($40,000 in total if your spouse or common-law partner also qualifies and is going back to school).
In order to participate in the program, you must meet the following conditions:
- own an RRSP;
- be enrolled (or received an offer to enrol before March of the following year) as a full-time student in a qualifying educational program at a designated educational institution;
- be a Canadian resident;
- not have your repayment period start if you have made an LLP withdrawal in a previous year and ;
- finish participating in the LLP before the end of the year you turn 71.
There is an exception to the qualifying provision. If you are a person with a disability and meet one of the disability conditions outlined by the Lifelong Learning Plan, enrolment in an eligible educational program can be on a part-time basis instead.
It should be noted that the Lifelong Learning Plan funds are not considered taxable income and as such not subject to withholding tax as long as you:
- continue to meet the qualifying conditions;
- meet your annual repayment obligations; or
- repay the full amount withdrawn within 10 years.
That being said, if circumstances affect your eligibility or if you repay less than required or if you even fail to repay the funds in full, you are required to include the RRSP withdrawal as income on your tax return.
You can enrol in the LLP as often you like. There is no limit to how many times you can participate. As long as you repay your Lifelong Learning Plan in full and the balance resets to zero, you can apply again.
For more information on eligibility and rules of the Lifelong Learning Plan, or what other programs can help you and your family, feel free to contact GB Pilley & Associates Ltd., Chartered Professional Accountants at 604 926 3522.