Disabilities not only make day-to-day life challenging, but they can also make it much more expensive.
To help Canadians on disability who struggle to pay their bills, the federal government offers a suite of financial options that can help you offset costs, including:
- The Disability Tax Credit (DTC)
- The Registered Disability Savings Plan (RDSP)
- Government grants
- Canada Disability Savings Grant (CDSG)
- Canada Disability Savings Bond (CDSB)
These options build on each other, giving you comprehensive aid where and when you need it.
Let’s walk through each option to help you understand how to get the most savings on disability.
What is the Disability Tax Credit (DTC)?
The DTC is a non-refundable tax credit that reduces your income tax load. Essentially, the DTC grants qualifying individuals an extra tax credit at the end of the year. This could even allow you to decrease your income tax to $0 – but not below.
Applying for the DTC is the first step you – or your supporting family member – can take to manage the cost of living with a disability. Once you, or your loved one, is approved, it opens the door to even more support.
Who qualifies for DTC?
Anyone with a severe or prolonged impairment that restricts the ability to perform the activity of basic, daily living can apply for this credit.
It also includes impairments affecting:
- Elimination (bowel or bladder functions)
- Mental functions
- Or any condition that requires life-sustaining therapy – including type 1 diabetes
How do you apply for DTC?
The first step is to talk to a medical practitioner who can certify your impairments. Depending on your disability, you can see a:
- Medical doctor for all impairments
- Nurse practitioner for all impairments
- Optometrist for assessing vision
- Audiologist for hearing assessments
- Occupational therapist for walking, feeding or dressing assessments
- Physiotherapist for assessing walking
- Psychologist to assess mental functions
- Speech-language pathologist for speaking assessments
Once your impairments have been certified, you can start the application for the DTC on the Canada.ca website.
To apply, simply:
- Sign into your account
- Find and select ‘Benefits and credits’
- Select ‘Apply for DTC’ and fill out form A. You can fill out this form over the phone if that is more convenient for you
Once you’ve filled out the form, you’ll be given a reference number. You’ll give this reference number to your medical practitioner, who will fill out form B. Once part B is completed by your medical practitioner, the digital form is automatically submitted to the CRA.
During the process, you can retroactively apply for up to ten year’s worth of tax credits if you have been dealing with your impairment previous to your application.
How much is the Disability Tax Credit?
The federal tax credit for 2023 is $8,986. For dependants, some or all of that tax credit may be transferred to their caretakers.
There is also a supplement of $5,500 for taxpayers under 18 years of age. However, the supplement is reduced when total child care and attendant care expenses claimed for the taxpayer under 18 exceeds $3,221. It is eliminated completely when those expenses exceed $8,721.
What is a Registered Disability Savings Plan (RDSP)?
Once your application for the DTC is approved, you are free to open a RDSP.
This registered savings plan helps people with disabilities save for the future, but it also opens the door to receiving grants and bonds from the Government of Canada. This makes a RDSP a very powerful savings tool.
How does a RDSP work?
Much like a RRSP, a RDSP is a tax-sheltered investment vehicle aimed at long-term savings.
Any money invested into a RDSP is sheltered from taxes, while investment income and capital gains taxes are deferred while in the RDSP.
Opening a RDSP requires two roles to be filled:
- A plan holder – the person who opens and manages the plan
- A plan beneficiary – the person who is approved for the DTC
These roles can be filled by one person, or by two. The plan beneficiary is always the person who is approved for the DTC, and this individual can often be the holder as well.
However, if the beneficiary is under the age of majority (which is 18 in Manitoba), or is unable to be the plan holder, a parent or guardian can manage the plan.
Once opened, anyone with permission can contribute to the plan. There is no yearly limit for the RDSP, however, there is a lifetime maximum of $200,000 for all contributions. Once the limit is hit, no one is allowed to contribute.
When you withdraw money from your RDSP, certain portions of the withdrawal will be taxed while other portions will not be. Grants, bonds, and interest earned on investments will be taxed, however, your original contributions will not be taxed.
How do you open a RDSP?
Once you’ve been approved for the DTC, you can open a RDSP at your financial organization.
To open a plan, the beneficiary must:
- be approved for the Disability Tax Credit
- apply before December 31 of the year they turn 59
- be a resident of Canada
- have a SIN
Once you’ve opened your RDSP, apply as soon as possible for the CDSG and the CDSB, which you can find information on next.
Canada Disability Savings Grant & Canada Disability Savings Bond
The CDSG and CDSB are government grants directly deposited into your newly opened RDSP.
Canada Disability Savings Grant (CDSG)
This is a matching grant, meaning the federal government invests in the RDSP alongside the account holder. The government’s contributions are based on how much is invested during the year, and on the beneficiary's family income. The grant is capped at $3,500 per year and has a lifetime limit of up to $70,000. It is paid up until December 31 of the year the holder turns 49.
Canada Disability Savings Bond (CDSB)
This is paid to low- and moderate-income individuals and does not require any investment into the RDSP by the holder. It is calculated based on the income of the holder, and has a yearly maximum of $1,000, up to a lifetime maximum of $20,0000.
You may be eligible to receive more in a year if you were approved for the DTC for any or all of the previous 10 years before your application. This amount is called a carry-forward.
In fact, a lot of our clients who apply for the DTC have their approval backdated 10 years. So, if their income is below $34,863, they immediately get $10,000 paid into the account before they have put even $1 in.
The income matching rates
The government decides on the amount of aid it pays based on the account holder’s income. This is decided based on three phases.
- Phase out income is the amount of income the CDSB payable begins to decrease. $34,863
- First threshold is the yearly income which when met or exceeded the CDSB payable becomes $0. As of 2023, it is set at $53,359
- Second threshold is the yearly income where the matching grant changes. As of 2023, it is set at $106,717.
- CDSG payments for those with an income of $106,717 or below are:
- On the first $500, the government invests $3 for every $1 invested up to $1,500
- On the next $1000, the government invests $2 for every $1 invested up to $2,000
- CDSG payments for those with an income over $106,717 are:
- On the first $1000, the government invests $1 for every $1 invested up to $1,000
- CDSG payments for those with an income of $106,717 or below are: