Want a job that will give you a better quality of life but need the training first? Would changing careers get you that position you’ve been eyeing? Did the company you work for downsize, inspiring you to reinvent yourself with a new career? Whatever your reasons, going back to school might be just the thing you need to reach your new goals.
Find out how the Lifelong Learning Plan (LLP) can help you start the next chapter in your life.
1. The ABCs of the LLP
Perhaps you’ve already heard of the Home Buyers’ Plan—the government program that lets you make tax-free withdrawals from your RRSP to buy or build your first home. But did you know that under the LLP, you can also withdraw money from your RRSP to go back to school?
Basically, it’s like giving yourself a 10 year loan using money from your RRSP—interest free. A few more facts about the LLP:
- You can withdraw up to $10,000 a year from your RRSP, provided you don’t withdraw more than $20,000 over a 4-year period. The money isn’t taxable in the year you withdraw it.
- You can use the LLP to pay for school for yourself or your spouse or common-law partner, but not for your kids or your partner’s kids.
- You can participate in the LLP more than once, but you have to pay back your RRSP in full before you can make withdrawals under the LLP again.
2. Who’s eligible for the LLP?
To qualify for the LLP and go back to school with financial peace of mind, you must:
- Have an RRSP
- Be a Canadian resident
- Be enrolled full-time in a qualifying educational program
- Spend 10 hours or more per week on courses or work in a program that lasts at least 3 consecutive months
- Attend a recognized educational institution
3. Your RRSP withdrawal is only tax-free if you pay it back.
Since an RRSP is a tax-deferred investment, you must repay whatever you withdraw for your LLP and follow the conditions below, or you’ll end up having to pay those taxes after all.
- You have 10 years to pay back the money
- Once you start making payments, each year, you must repay 1/10 of the total amount you withdrew, until your LLP balance is paid off
- The latest year you can start repaying your LLP withdrawals is the fifth year1 after your first withdrawal
If you’re hoping for tax savings when you repay your RRSP withdrawals, you’ll be disappointed. Repaying your RRSP doesn’t count as a contribution—you can’t deduct this money from your taxable income a second time.
4. Don’t have an RRSP?
Look into government loans, grants and bursaries.
Borrow for a better tomorrow
Contact your advisor if you’d like to learn more about the LLP and how it can help you go back to school.
Good luck with your studies—and your future career!
1. The repayment period begins before the fifth year if your studies last fewer than 3 years.
2. Subject to credit approval. Certain conditions apply.