Tax season is upon us: the time of year Canadians traditionally make donations to an RRSP to benefit from immediate tax savings and to shelter money for retirement. If your family is one of the over 300,000 in Canada that live with epilepsy you can also benefit from a Registered Disability Savings Plan (RDSP).
Mark Lundquist, a financial planner with Edward Jones says, “Qualifying individuals can receive up to 300% of their contributions matched in the form of government grants, making an RDSP a very attractive investment option.”
How can people with disabilities benefit from the RDSP?
The structure of an RDSP is similar to the Registered Education Savings Plan (RESP). The RDSP allows money to be invested, exempt from tax until it’s withdrawn. Benefits include:
1) Contributions are matched by federal grants. The federal government will match contributions made to the RDSP with Canada Disability Savings Grants. Grant amount depends on the size of the annual contribution as well as family net income. These grants are available until the year the beneficiary turns 49, to a maximum of $70,000.
2) Low-income families receive an additional bond. Families whose net income is $37,885 or less will receive annual Canada Disability Savings Bonds of up to $1,000 towards the RDSP. Like the grant, these bonds can be received until the year the beneficiary turns 49 years old, up to a lifetime limit of $20,000.
3) Investment income is tax-exempt until withdrawal. Earnings generated by contributions to the savings plan are tax-exempt while they stay in the plan. When earnings are withdrawn, they are taxable in the hands of the beneficiary and likely to be taxed at a lower rate.
Who is eligible?
To qualify for the RDSP, you must be eligible for the Disability Tax Credit and have submitted a Form T2201, Disability Tax Credit Certificate to the Canada Revenue Agency. The two basic conditions are that (1) your disability has lasted (or is likely to last) at least 12 months and (2) your ability to carry out basic activities of daily living are significantly restricted. A brief questionnaire to help see if you qualify and Disability Tax Certificate application forms are available from the Canada Revenue Agency. Visit their website or call 1-800-959-8281.
To learn more about the Registered Disability Savings Plan ask a qualified financial advisor. Mr. Lundquist can be contacted at mark.lunquist@edwardjones.com .
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