Lifelong Learning Plan (LLP) Withdrawals in 2026: What You Must Repay — and When

– Income Tax Act s.146.02 | CRA Guide RC4112

You want to go back to school.
Or your spouse does.

Instead of borrowing at high interest, you consider withdrawing from your RRSP under the Lifelong Learning Plan (LLP).

It feels tax-efficient.

It is — but only if you understand the repayment rules.

The LLP is not a tax-free withdrawal.

It is a structured deferral under ITA s.146.02.

Let us examine how it works in 2026.

 

First Principle: LLP Is a Temporary RRSP Loan

Under s.146.02, eligible individuals may withdraw funds from their RRSP to finance qualifying education for:

• Themselves, or
• Their spouse/common-law partner

The withdrawal is:

• Not taxable at the time of withdrawal
• Subject to mandatory repayment

Like the Home Buyers’ Plan, the LLP is an interest-free loan from your RRSP.

 

How Much Can You Withdraw?

Current LLP limits allow:

• Up to $10,000 per calendar year,
• Maximum cumulative withdrawal of $20,000 per participant

The withdrawals must relate to qualifying educational enrollment.

Withdrawals beyond the limit are taxable.

 

What Is “Qualifying Education”?

The student must:

• Be enrolled in a qualifying educational program
• Attend a designated educational institution
• Meet minimum enrollment requirements (generally full-time or qualifying part-time study)

CRA requires Form RC96 to withdraw under LLP.

If the program does not qualify, the withdrawal may become taxable.

 

When Do Repayments Start?

Repayment begins:

The fifth year after the first withdrawal,
or
The second year after the student ceases to be enrolled full-time — whichever comes first.

This is longer than the HBP deferral period.

But repayment is mandatory.

 

Repayment Period

The LLP must be repaid over:

10 years

Each year, you must repay:

• 1/10 of the total LLP withdrawal

CRA tracks your outstanding LLP balance annually.

 

How Repayment Works

You contribute to your RRSP.

On your tax return:

• You designate part of your contribution as LLP repayment.

Only designated amounts reduce your LLP balance.

Failure to designate properly results in income inclusion.

 

What Happens If You Do Not Repay?

If you fail to repay the required minimum amount:

The shortfall is added to your taxable income for that year.

This amount:

• Is fully taxable
• Does not create new RRSP room
• Permanently reduces your RRSP shelter

You cannot retroactively fix it later.

 

Example Scenario

You withdrew $20,000 under LLP.

Annual repayment required: $2,000.

You contribute $2,000 to your RRSP but do not designate it as LLP repayment.

Result:

• $2,000 added to income
• RRSP contribution treated as normal deduction
• LLP balance remains unchanged

Designation is critical.

 

Interaction With Employment and Corporate Strategy

For incorporated professionals:

• LLP repayments require RRSP contribution room
• RRSP room requires earned income (typically T4 salary)

If you pay yourself only dividends:

You may not generate sufficient RRSP room to fund LLP repayments.

Compensation structure must align with LLP obligations.

 

What If You Become Non-Resident?

If you become non-resident before repayment is complete:

• The remaining balance may become taxable

Departure planning must include LLP review.

 

What If the Student Does Not Complete the Program?

If enrollment ceases earlier than expected:

Repayment may accelerate.

CRA uses enrollment status to determine repayment start.

Failure to monitor may trigger unexpected income inclusion.

 

LLP vs Student Loans

LLP advantages:

• No interest cost
• Flexible funding

But:

• Reduces retirement capital
• Requires disciplined repayment
• Eliminates RRSP shelter if unpaid

It is a liquidity tool — not free funding.

 

Common Misunderstandings

“LLP withdrawals are tax-free.”
They are tax-deferred — repayment required.

“Repayment is optional.”
Failure to repay triggers income inclusion.

“RRSP contribution automatically counts.”
You must designate repayment on your return.

“Selling assets later will fix it.”
Once income inclusion occurs, it cannot be reversed.

 

Strategic Considerations for 2026

Before withdrawing under LLP:

• Confirm long-term RRSP funding capacity
• Align compensation strategy
• Evaluate alternative financing
• Review tax bracket timing
• Model cash flow impact

LLP should be integrated into retirement planning — not treated in isolation.

 

Final Thoughts

Under ITA s.146.02, the Lifelong Learning Plan allows temporary access to RRSP funds for education.

But repayment over 10 years is mandatory.

Failure to repay results in taxable income inclusion.

For entrepreneurial families and owner-managers, LLP planning must align with salary strategy, RRSP room generation, and long-term retirement design.

At Shajani CPA, we integrate education funding decisions with corporate compensation planning and retirement architecture.

Because short-term liquidity decisions affect long-term wealth.

Tell us your ambitions, and we will guide you there.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2026 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.