Financial knowledge is at the heart of stretching our dollars. For those with a severe and prolonged disability, saving money can be particularly challenging, given the expenses that often accompany disabilities and, in some cases, the difficulties getting or holding a job.
And if you are tending to a loved one with a disability, extra costs likely are involved.
A primary aspect of enhancing the financial literacy of Canadians is making individuals who can use support aware of where help is available. This is especially true when government initiatives aimed at helping a specific group aren’t being fully utilized.
For those with a disability or individuals providing care, financial assistance may be available in the form of a savings plan, tax credit or both.
Help save for the future
The late Finance Minister Jim Flaherty had a particular interest in supporting the disabled, based on one of his own son’s challenges. At his urging, Canada’s Federal Government created the Registered Disability Savings Plan (RDSP) in 2008, as a long-term savings vehicle to help Canadians with disabilities and their families. It has both a bond and grant component. The RDSP is the only savings vehicle of its kind in the world for people living with disabilities.
The Canada Disability Savings Grant is a matching grant, with a maximum contribution per year capped at $3,500. Depending on the amount of the contribution you make, the matching grant may be calculated at 100, 200 or 300 per cent. The lifetime maximum is $70,000.
The Canada Disability Savings Bond is $1,000 per year, specifically for low-income individuals. The bond is paid into an RDSP even if no contributions are made to the plan. The lifetime maximum is $20,000.
The RDSP money earns interest, tax-free, until it is withdrawn. Only government contributions and interest earned are taxable, not private contributions made into the plan. The RDSP also has a 10-year, carry-forward provision for unused bond and grant entitlements.
Benefits can be earned retroactively
If you are just learning about the RDSP, you may be entitled to unclaimed grants and bonds dating back to the program’s inception. You need to first open an RDSP and give evidence as to when you might have first qualified.
Registrants of the RDSP have definitely benefited. We spoke with one who is glad to be participating, “I didn’t know the program existed until a niece who was studying to become an accountant learned about it. I can’t say the process is a quick one — it took months to work things through — but now I’m registered. The biggest obligation fell to my doctor, as each applicant’s physician has to submit a detailed form to attest to their disability. Other than that, the questions were straightforward. If you think you may qualify, look into it.”
The registrant adds, “there are other savings vehicles out there such as provincial plans, but the RDSP is particularly good because you can put some dollars aside and not be off-side with other savings plans.”
Reduce your taxable income with a DTC
The Disability Tax Credit (DTC) is a non-refundable tax credit, meaning you cannot get a refund based on it, but it can be used to offset taxes owed from eligible income. In 2016, the amount is set at $8,001. According to the Canada Revenue Agency, last year about 1.1 million Canadians qualified and about 700,000 people took advantage of it. If it’s determined you qualified earlier, it’s possible to be reassessed and save on previous tax filings. The credit can be used either by persons with disabilities or by their supporting family members or caregivers.
The RDSP registrant we talked with also takes advantage of the tax credit, noting, “Everything helps financially. If you’re feeling overwhelmed, I suggest asking for assistance from a professional accountant.”
Start with finding out what’s available
CPA Canada recognizes the importance of spreading the word about the DTC and RDSP. Our nationwide network of financial literacy volunteers keeps up-to-date and, wherever possible, we are promoting the initiatives via our community outreach programs.
The RDSP registrant says it best: “You can’t take advantage of help if you don’t know about it.”