If there is someone in your family eligible for the disability tax credit (DTC), don’t forget to consider the Registered Disability Savings Plan. RDSPs are tax-deferred plans open to Canadian residents eligible for the DTC, their parents and other eligible contributors. Up to $200,000 can be contributed to the plan until the beneficiary turns 59, with no annual contribution limit. While contributions are not tax deductible, all earnings and growth accrue on a tax-deferred basis.
Federal government assistance in the form of matching Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) may be deposited directly into the plan up until the year the beneficiary turns 49. The government will contribute up to a maximum of $3,500 CDSGs and $1,000 CDSB per year of eligibility, depending on the net income of the beneficiary’s family.
The government has announced that, for 2017, if the RDSP beneficiary’s family income in 2015 (as the second preceding year’s income is used in determining grant and bond payments) was below $91,831, the government will pay a 300 per cent CDSG on the first $500 in annual contributions and a 200 per cent CDSG on the next $1,000 in annual contributions. If the beneficiary’s annual family income was greater than $91,831, only a 100 per cent matching CDSG will be paid on the first $1,000 in annual contributions.
The CDSB is an amount of up to $1,000 paid into an RDSP for a low-income beneficiary. Unlike CDSGs, no contribution is needed to attract the CDSB.
To receive the full $1,000 bond in 2017, the beneficiary’s family income in 2015 must have been less than $30,000. For family income between $30,000 and $45,916, the CDSB is based on a legislative formula and once family income is over this amount, no CDSB is payable.
Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Wealth Strategies Group in Toronto.
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