Vicarious Therapy: How To Become Up to $5000.00 Richer Each Year

Saturday, January 03, 2009

How To Become Up to $5000.00 Richer Each Year

Canadian Disability Tax Credit and Registered Disability Savings Plan:

This is an information post for any Canadians who are currently on Canadian Gov't Disability Income programs, or Provincial Disability Income programs:

Previously, if you did not have a higher income, eg. were receiving disability from both an employer and CPP, it did not appear worth a person's while to apply for the yearly Disability Tax Credit of $6890.00, as you would not have the income to write it off against.

However, this year (2009) the Government has something called a "Disability Savings Plan". To qualify for it you need to qualify for the Disability Tax Credit.

Why would I want to qualify for the Registered Disability Savings Plan?:

It allows anyone (family , friends, etc. to contribute to an account where all money in the account is tax free until the money is withdrawn.

This will allow your savings to increase at a faster rate.

No annual limit to the amount you can invest (is a lifetime limit of $200,00.00), so it is better than an RRSP (for most of us)...given we probably don't have $200,000 room to contribute in our RRSP), because if you receive an inheritance, or larger sum of money you can invest a larger amount than with an RRSP.

There is a disability savings grant (Government meets or exceeds your deposit amount based on how much you save) of up to 3500.00/year for those who are beneficiaries in an RDSP. (people deposit money, and depending on your family net income and how much you invested over the year, you can receive up to 3500.00 from the federal government.

Government Website:

"The government will contribute, in the form of Canada Disability Savings Grants, funds equivalent to 100% to 300% of RDSP contributions, up to a maximum of $3,500 depending on the net income of the beneficiary's family"

Translation:
(because whoever they hire to write government documents makes no sense at all):

You can receive up to a $3500.00/year
The maximum annual is $3,500 for families with net incomes of less than $75,770

Beneficiary's Family Net income Less than or equal to $75,769: (from BMO Website)

On the first $500 [deposited into your account the gov't will give you a grant of] $ 1,500: $3 for every $1 contributed [maximum grant of 1500.00]
On the next $1,000: $2 for every $1 contributed [Maximum grant of $2,000]

Beneficiary's Family's Net Income Greater than $75,769*, or no income info with CRA:

On the first $1,000 $1 for every $1contributed [up to a maximum of] $1,000
This means the gov't will give you up to $3500 grant depending on how much you make and invest each year, or as BMO puts is:

"The amount of the grant depends on both the beneficiary’s family net income and the amount of each plan deposit. Contributions to an RDSP may qualify for payments from the CDSG, up to a lifetime maximum of $70,000 per beneficiary. The maximum annual CDSG is $3,500 for families with net incomes of less than $75,770"

So if the beneficiary's family has a net income of $75769.00 or less, and saves $1500.00 a year, the government will give you a grant of $3500.00

All of a sudden you will have $5000.00 saved that is tax free until you take it out.

If the beneficiary's family has a net income of $75769.00 or more, and saves $1000.00 a year, the government will give you a grant of $1000.00/year

All of a sudden you will have $2000.00 saved that is tax free until you take it out.

***And if your income is to low for you to save any money you may qualify for the

Canada Disability Savings Bond : (From BMO's Website)

Lower-income families may qualify for payments from the CDSB program without having to make a contribution to an RDSP, up to a lifetime maximum of $20,000.
The maximum annual CDSB is $1,000. This applies to families with net income below $21,288.*
Canada Disability Savings Bond payments are prorated for families with higher incomes. This applies to net incomes greater than $21,287, but less than $37,885.*
The maximum annual CDSB is $1,000. This applies to families with net income below $21,288.*

Below is the application for the Disability Tax Credit (Form T2201):

You and your pdoc need to fill this out.
You need to qualify for this to qualify for this in order to qualify for either the disability savings bond, or the Disability Savings Bond
I have also posted a couple links about the Disability Savings Plan

Info your pdoc may need...People with mental illnesses never used to qualify for the Disability Tax Credit. This has changed recently and the criteria are a bit different for mental health disabilities: