Disability tax credit, bonds, savings plans, and medical expenses


#1

Hi all,

I am very fortunate to have gotten the Disability Tax Credit. As far as I understand, because I haven’t paid taxes in a number of years, it won’t assist me from a tax perspective (except for a small amount related to a CPP-D retroactive lump sum tax). I don’t have a partner to transfer the credit to. Mostly friends and family help me informally, so I assume I can’t transfer to one of them?

I’m glad to have the DTC because of what I have read about savings opportunities/govt matching and possibly programs for taking a university class. Are there other benefits I’m unaware of once you have DTC? Any tips for me in terms of things to think about regarding the savings plans?

I have been using my savings to pay for medical treatments, so have high medical expenses. Since I pay no tax, I can’t claim them. The medical expense burden is tremendous. I realize it is my choice to use my savings, but I feel I must be missing something from a tax credit perspective? Any advice would be appreciated.

Thanks very much


#2

You should open an RDSP if you’re under 50.
I don’t know of any other benefits to the DTC unless you pay tax or can transfer it to a caregiver.
I’ve never heard of reduced tuition.


#3

Dear Searching, I will start by saying there is no financial advice that you can rely on by reading anything on the internet and the disclaimers from professional financial firms are not motherhood statements. You really must seek professional advice before you act on anything or dismiss any opportunity. So, I am not providing you any advice and might only know a little bit more than you do. I do have a few piece of information that some people don’t know, even possibly your financial advisor.

You know the disability tax credit is not approved forever as some people’s conditions improve or they could review your situation “decide” you no longer qualify. Becoming ineligible for the DTC has implications for somebody who has an RDSP. Please don’t be scared by this statement, as all conditions are not the same, but that statement on your DTC certificate is not a motherhood statement. You need to understand the RDSP and it is somewhat complicated, to say the least… but the BEST thing that has come out for disabled people… assuming they understand what it is and what it is not (for example, it is not a piggy bank).

Second, while a person under 50 could qualify for grants or bonds into an RDSP, a person between 50 and 59 could lose out on a great financial opportunity, in at least one very specific situation, if they believed it NEVER made sense for anyone over 50 to open a RDSP. If you are over 50 and a financial advisor tells you “just forget RDSP’s because they make no sense for you” out of hand and doesn’t explore all the details in depth, then quite honestly, he doesn’t deserve your business and if you missed out on the following opportunity because of his advice, you should figure out what recourse you have.

Here’s one possible reason you MIGHT open an RDSP between age 50 and 59. If you are disabled and eligible for the DTC and financially dependent on a parent or grandparent, they might be able to roll over up to $200,000 of registered money from an RRSP/RPP/RRIF upon his death to you, which could defer a large amount of tax and make a large difference to your financial well being. There are MANY details that must be considered, so please do not take this information at face value and draw any conclusions or generalizations from it, as it is a very complex topic. Check it out on the Canadian government website - CRA Rollover RDSP RC4625.

This is one reason why it could make sense! There are other reasons it could make sense (and some where it doesn’t make sense). I’ll leave it at that.


#4

Actually, mine is.

I inherited money taxable?


#5

Jammer - there are too many technicalities to answer here on a forum. Since you are eligible to receive the DTC indefinitely there are quite a few things your parents, I assume, could consider in setting up their estate. I’m by no means an expert on this topic, but was just waiting for the next person to say “forget the RDSP if you are over 50” because I know that is a false statement in some cases and estate planning is important for parents and grandparents of disabled children/adults. As it turns out, YOU made the comment and are now asking followup questions. Unfortunately, the answers are too case specific for a public forum and you won’t find the answer on the internet.


#6

Thanks for the thoughts. You are right that it is a very complicated program. I’m rather amazed at the opportunity for help from the govt, and feel very grateful.

I am going ahead to open an RDSP and will get some help investing. Since the bonds and grants are repayable if I lose the DTC within 10 yrs, or take out money within 10 years, I will need to ensure that I don’t invest in volatile things. It would be horrible if I had to repay grants and bonds after losing money on the principal!


#7

Searching, you clearly have experience investing and a good head on your shoulders with regard to money!. You are responsible for the “gains and losses” of your investments within an RDSP. Yes, you should seek financial advice, because you will need to make good choices about the investments you make within the RDSP and understand the tax treatment of RDSP money versus non-registered investments. There are lots of nuances, and you should make sure your financial advisor has a deep understanding of taxation and the RDSP products and legislation.