The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers don’t have to face. Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the working income tax benefit, and the child disability benefit.
You are eligible for the DTC only if CRA approves Form T2201. A medical practitioner has to complete and certify that you have a severe and prolonged impairment and must describe its effects. Answer a few questions to find out if the person with the disability may be eligible. See Examples of impairments to show the basic differences between impairments that qualify for the DTC and those that do not.
A registered disability savings plan (RDSP) is a savings plan that is intended to help parents and others save for the long term financial security of a person who is eligible for the disability tax credit (DTC). Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. Contributions that are withdrawn are not included in income for the beneficiary when they are paid out of an RDSP. However, the Canada disability savings grant (grant), the Canada disability savings bond (bond), investment income earned in the plan, and rollover amounts are included in the beneficiary's income for tax purposes when they are paid out of the RDSP.
The Registered Disability Savings Plan (RDSP) is a Canada-wide registered matched savings plan specific for people with disabilities. Here are some basics:
- For every $1 put in an RDSP account, the federal government can (if your family income is below $87,123) match with up to $3! This is the Canada Disability Savings Grant.
- For people living on a low-income (less than $25,356), the federal government will put in $1000 each year for 20 years! This is the Canada Disability Savings Bond.
- For people living on an income between $25,356 – $43,561, they can still receive a partial bond.
Anyone can contribute to an RDSP- family, friends, neighbours… it gives people who want to help a way to do so!
The money can be invested to grow. Depending on someone’s income, any money saved immediately triples in value. The RDSP is exempt from most provincial disability and income assistance benefits. It does not get clawed back and it does not reduce disability benefits payments.
People with disabilities can choose what to do with the money when it comes out- there are no restrictions on how the money can be spent!