Individuals with Disabilities

In addition to the disability tax credit, parents and others will be able to establish Registered Disability Savings Plans (RDSP) to provide for the long-term security of a child who is eligible for the disability tax credit.

RDSP contributions will not be tax deductible, but investment income can be earned within the plan on a tax-free basis. Upon withdrawal only the accumulated investment income will be taxable to the beneficiary. The contributions to the RDSP will be paid to the beneficiary tax-free.

Anyone can contribute to the RDSP and there is no annual limit on the contributions; however, contributions on behalf of any one beneficiary are capped at a lifetime maximum of $200,000. Contributions can continue until the end of the year in which the beneficiary reaches age 59.

The beneficiary must begin receiving “lifetime disability assistance payments” (LDAP) from the plan by the end of the year he or she reaches age 60, subject to maximum annual limits based upon life expectancy and the value of the RDSPs assets.

A Canada Disability Savings Grant (CDSG) is an amount that is contributed by the federal government to the RDSP. Contributions to the RDSP will earn CDSGs at matching rates of 100 per cent, 200 per cent, and 300 per cent depending on family income and the amount contributed. The annual maximum CDSG is $3,500 where family income is less than $89,401 and $1,000 otherwise. An RDSP beneficiary can accrue up to $70,000 of CDSGs in their RDSP over their lifetime. No CDSGs will be paid to an RDSP after the year in which the beneficiary reaches the age of 49.

Lower income families might also be entitled to receive Canada Disability Savings Bonds (CDSBs) of up to $1,000 per year (to a maximum of $20,000 over the beneficiary’s lifetime). Eligibility for CDSBs will be linked to family net income, rather than amounts contributed.

Consult a Chartered Professional Accountant for more information.