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Disability Tax Credit

For those who live with disabilities every day, the Canadian Disability Tax Credit is something to consider. Available to disabled persons as well as supporting family members and full time caregivers, it can be very helpful in offsetting the often-prohibitive costs of daily care. Rather than a regular monthly payment, such as would be received through OSDB or the Canada Pension Plan, this credit is applied against income tax, and when first approved for can be received as a lump sum payment that covers up to ten years retroactively.

The credit amounts to approximately $1165 per year, with an additional supplement of $680 for those under the age of eighteen. It differs from other provincial and federal tax credits commonly filed with a return in that it must be applied for prior to filing, and cannot be claimed until it has been approved by the CRA. Statistically, almost ninety percent of eligible applications are approved, and most candidates will receive their decision within eight weeks.

Offered to those whose disabilities are expected to last or has lasted twelve months or more, the Disability Tax Credit applies to those with physical and/or mental disabilities that have resulted in a marked and severe loss of the ability to perform normal, daily functions such as walking and talking, or for those with severe visual or hearing impairment.

Disabilities that fall into this category could include the following

  • chronic pain disorders
  • paraplegia
  • quadriplegic paralysis
  • hearing loss
  • debilitating mental disorders
  • etc…

In short any condition that gets in the way of performing simple daily tasks such as dressing or feeding oneself, taking medications or using the toilet may qualify. The degree of impairment is considered as well, and is defined as either markedly restricted or significantly restricted. In the case of ‘marked’ restriction, it is assumed that an inordinate amount of time is required to perform basic daily living activities at least ninety percent of the time, or that the disabled person cannot perform these tasks on their own. ‘Significant’ restriction implies that the applicant may not quite meet the definition of ‘marked restriction’ but is still substantially restricted most of the time.

The application form contains a self-assessment quiz that can help determine which category the applicant falls into, and should be completed by anyone who is considering applying for benefits under this program. But one thing you should keep in mind, even if you feel that you might not qualify, you should consider approaching one of the companies from the Association of Canadian Disability Benefit Professionals, National Benefit Authority the Company I founded, is the original founding member of this Association.

The application is in two parts, and it is necessary for a qualified physician to complete and sign the medical portion. Though the process may seem daunting, it is well worth the effort for those suffering with long-term issues. In fact, it is a requirement for certain other disability benefits, including the RDSP (registered disability savings plans), Canada Disability Savings Grants and Disability Bonds.

Those who receive ODSP or disability payments through the Canada Pension Plan, Quebec Pension Plan or WSIB (workman’s compensation) are not necessarily entitled to receive a Disability Tax Credit, as these programs all have differing criteria, such as the individuals ability or inability to work. The application is available as a printable PDF download or a form-fillable PDF which can be completed on line, and is also available in braille, large print and even MP3 audio for the visually impaired. Access the Disability Tax Credit application anytime by visiting the CRA website.

Consider Applying yourself, but if you feel the need to have a helping hand of a professional you are always welcome to use our free consultation service by National Benefit Authority.

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RDSP Grants & Bonds

The steady increase in the number of the accounts opened in the seven years after the introduction of the Registered Disability Savings Plans (RDSP) in 2008, shows the potentials that these plans possess in making a difference for Canadians facing grave financial obstacles. As at the end of March 2014, over 78,000 accounts had been opened by Canadians out of an estimated 550,000 eligible Canadians. The current number of accounts represents only 14% of those eligible.

It’s usually a surprise to disabled people when they find they can get thousands of dollars even when they don’t make any form of contributions to their own plans, one recurring comment that all advocates hear is that “there must be a catch.”

What is an RDSP?

RDSP are assisted savings plans created particularly to give financial security to those with disability. It is similar to RESP, Registered Education Savings Plan, in that until withdrawal of funds, the growth inside the plan is allowed to grow sheltered from tax. Federal grants and savings bonds further boost contributions providing on a yearly basis, depending on income, up to $4,500 per year, up to a lifetime limit of $90,000.

Who is eligible?

Disabled adults can set up plans for themselves while parents or guardians of disabled children can set up plans for them, the applicants must meet 3 basic conditions to be eligible for an RSDP account. Applicant must be a Canadian resident with a social insurance number (SIN), eligible for the disability tax credit (DTC), ensuring that plans only get set up for those with a severe and ongoing physical or mental impairment and under the age of 60 as at the time of making the contributions. Only one RDSP account can be setup per person.

How do they work?

Once the RSDP account is set up for a beneficiary, provided the plan holder gives a written consent, anyone can make contributions to the plan. The rules allow the plan holder to strategically plan contributions in order to optimize matching government bonds and grants.

The government provides grant up to $3,500 yearly depending on how much is contributed and family income. A bond of up to $1,000 is added yearly for lower-income Canadians with RDSP, by the federal government. This money has to remain in the plan for a minimum of 10 years.

There’s a lifetime contribution limit of $200,000 aside bonds and grants, though, there are no annual limits on the amount that can be put into the plan. Dec 31 is the deadline for contribution each year. A tax-free rollover of company pension plan money, RRSP or RRIF to an RDSP can be arranged by parents or grandparents of a disabled child or grandchild when parent or grandparent dies.

What are the criteria for grants and bonds?

Assuming that the maximum $90,000 of federal grants and bonds are received in those 20 years and the plan is in place for another 10 years (to avoid any repayment issue) an RDSP could grow to be over $300,000, assuming a modest return of 5 per cent per year over the 30 years.

In one year, an RDSP can receive a total of $3,500 in CDSGs (Canada Disability Savings Grants) and over a lifetime of the RDSP’s beneficiary, a maximum total of $70,000. For an $87,123 net income family in 2013, the grant is equivalent to the first $1,000 contributed to a $1,000 a year maximum. The grant is sweetened for below $87,123 net income families. Ottawa contributes $1500 on the first $500 contributed while they add in $2000 on the next $1,000 so that a contribution of just $1,500 results in a yearly maximum grant of $3,500.

The RDSP gets a $1,000 bond yearly, for families with incomes up to $25,365, whether or not the RDSP holder got any contributions that year in Canada Disability Savings Bond. The grant disappears proportionately for incomes between $25,365 and $43,561until it totally disappears at incomes over $43,561. For bond payments, the lifetime limits is $20,000. Thresholds are inflation-adjusted yearly.

It’s the child’s parents’ or guardians’ net income that is the key figure for RDSP beneficiaries under 18 years while for plan holders 18 or older, the key figure is their own family income, whether or not they are currently living with their parents. A 10-year carry forward of unused bond and grant entitlement is allowed by Ottawa for anyone just opening a plan.

The bottom line is that every disabled adult should apply for the disability tax credit, file tax returns set up an RDSP and apply for bonds and grants, whether they have any income or not. The money can really add up. Here’s one example: A low-income family contributes $1,500 a year for 20 years to an RDSP for a total contribution of $30,000. Assuming that the maximum $90,000 of federal grants and bonds are received in those 20 years and the plan is in place for another 10 years (to avoid any repayment issue) an RDSP could grow to be over $300,000, assuming a modest return of 5 per cent per year over the 30 years.

How are funds withdrawn from an RDSP?

Grants and bonds may have to be repaid if they were not in the plan for at least 10 years. The rule for repayment is that: for every $1 withdrawn, $3 of the bonds or grants paid in the previous 10 years must be paid back. Payments of disability assistance may be made from an RDSP any time.

Do RDSP withdrawals affect other benefits?

The part of the RDSP withdrawal that originates from contributions is not taxable while the part that originates from bonds, grants and growth is taxable.

The good news here is that the beneficiary’s entitlement to any federal income-tested benefit is not reduced by payments, like the guaranteed income supplement, the federal sales tax credit and the child tax benefit. In addition, a lot of territories and provinces declare a total or partial exemption of RDSP income and assets from provincial income tested support programs.

Want to find out more info about this great program, contact me and i will gladly provide you with any additional info you require, and / or assist you in opening RDSP account for yourself or your disabled child.

Don’t go to the bank, speak to the The RDSP Expert.

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All information provided was taken from Employment and Social Development Canada website, which is a reliable source and is believed to be accurate, however we cannot guarantee its accuracy. Certain conditions apply please contact your financial advisor for personalized financial advice.

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The topic is everywhere we turn. At both a macro and micro level. Debt reduction, budgeting, Wall Street, financial crisis, world economy, saving and spending. Our society, and rightly so, is obsessed with how money is spent. Too bad we all weren’t this conscientious during the ‘good times’. Now, for the most part, money seems to be harder to come by. People living beyond their means is fairly commonplace. Credit has created many monsters, tons of hardship and less and less accountability.

I remember the days and they weren’t that long ago, when you could stroll through a university campus and find tables set up with banks/financial institutions flogging credit cards for students. You literally had to have a pulse and you got approved. What a stunning mistake. (I haven’t spent much time inside a college or university campus of late, so perhaps it still happens.)

The bottom line? Never has there been a greater need for kids to be educated properly about money. And not all parents are equipped to do this. Save and spend seem to be fairly simple concepts until crisis strikes and the item you need to buy exceeds your ability to pay, or you’ve ‘absolutely’ got to have something even though you don’t have the money for it.

It is not easy teaching children about money in a generation of self-entitlement and instant gratification. In our household, we constantly preach patience — prudent but utterly exhausting.

The conversation usually goes something this: “I want to buy a XXXX, mom”. The response? “Okay, why do you need it?” Silence follows. “Everyone else has one.” Pause. “That’s really not a good reason.” Another try. “But why can’t I have it.” Deep breath. “I’d like to win the lottery or take a long vacation, but I can’t.” Silence. Huffing, muttering, grumbling. It may not be the best strategy according to parenting experts, but it works in our house. They go off and think about the conversation and end up understanding they don’t have to have something right away.

Since just before Christmas one of my kids has been after us for an ipod touch. If this kid does not end up in public relations, I will be shocked! His powers of persuasion and spin are something to behold for a tween and his tenacity is becoming legendary. We’ve remained steadfast. “You don’t need an ipod touch. You don’t have the money to buy one. Save your money and then we can look at it.”

I can cave in and be spineless with the best of them when it comes to certain requests my kids make, believe me. But over the years I’ve learned that doesn’t pay off in the long run — for them or us.

He keeps coming back for more. We repeat the same refrain. The bottom line is —- we have all survived. Saying no isn’t always easy, but when it comes to money it usually makes sense and cents.

Best-selling author, financial journalist (www.moneyville.ca) and television host, Alison Griffiths, preaches just that. Basic common sense. If you can’t pay for it, you cannot buy it, which means you can’t have it.

She offers parents some basic tips about how to teach kids about money management.

( Watch our interview with Alison Griffiths )

In this world of fleeting wealth, where the middle class is getting stretched further by the minute, where the chasm between rich and poor is expanding, and where many people are re-evaluating their needs and wants based on what they can afford, it makes sense to start kids off on a solid financial footing — which usually means equal parts of common sense and accountability.