Individuals under the age of 60 who are eligible for the Disability Tax Credit, their parents or others who are legally authorized to act on their behalf, may open a Registered Disability Savings Plan (RDSP). The RDSP is a long-term savings plan that helps Canadians with disabilities and their families save for the future. Funds are invested tax-free until withdrawal.
To encourage savings, the Government will pay a matching Canada Disability Savings Grant of up to $3,500 a year on contributions made into the RDSP. The Government will also pay a Canada Disability Savings Bond of up to $1,000 a year into the RDSPs of low-income and modest-income Canadians. Grants and bonds will be paid into the RDSPs of eligible individuals aged 49 and under. The lifetime limit for the grant is $70,000 and for the bond is $20,000.
The grant amount is based both on the contribution made and the family income in a particular year. The government provides matching grants ranging from 1x to 3x the contribution amount up to an annual maximum is $3,500. For family income less than or equal to $87,123, 3x for the first $500 and 2x for the next $1,000, up to the lower income maximum of $3,500. For family income more than $87,123, 1x for the first $1,000, up to $1,000 per year.
The bond is dependent on your family income and not contingent on making RDSP contributions. Income less than or equal to $25,356 will qualify for the full $1,000/yr. For family income between $25,356 and $43,561 the government will deposit a portion of the $1,000.
There’s also a carry forward (catch-up) provision that allows you to claim your unused grant and bond entitlements. Applications can be made until the end of the calendar year in which the beneficiary turns 49. There is a maximum annual catch-up amount of $10,500 for grants and $11,000 for bonds, so it’s important you properly plan your catch-up contributions with your financial advisor.
For more information on claiming the Disability Tax Credit please contact Complete Accounting Solutions for a free 1/2hr consult with a Registered Public Accountant http://www.completeaccounting.ca/results/free-consultation/ .
Solomon Nordine is the owner and president of Complete Accounting Solutions. Mr. Nordine is a Fellow Public Business Accountant (FPBA) and a United States Accountant.