The federal government contributes to RDSPs through two programs: the Canada Disability Savings Bond and the Canada Disability Savings Grant.
In both programs, the amount received is based on income:
- For a minor (until December 31st of the year the Beneficiary turns 18), it is the parents’ family net-adjusted income.
- For an adult (After December 31st of the year the Beneficiary turned 18), it is the Beneficiary’s personal net-adjusted income. If the Beneficiary has a spouse, it is their family net-adjusted income.
This is important because once the Beneficiary becomes an adult (the calendar year in which they turn 19), the amount of federal government contributions depends on personal net-adjusted income even if the Beneficiary is still living with his/her parents.
a) Canada Disability Savings Bond
Getting money through the Canada Disability Savings Bond does not require making any contributions.
The Canada Disability Savings Bond helps people and families affected by disability who have low incomes to save for their futures. With the Bond, the federal government will contribute even when people can’t contribute themselves or when their family and friends are not able to contribute.
The amount of Bond received depends on income (see above):
- If income is $25,356 (2013) or less, their RDSP will receive $1,000 a year.
- If income is between $25,356 and $43,561 (2013), the RDSP will receive a partial amount, depending on income. The greater the income, the smaller the Bond contribution.
Except where the carry forward of entitlements applies (see below), the maximum Bond that a person can receive in one year is $1,000. People can receive a maximum of $20,000 in their lifetime from the Bond.
b) Canada Disability Savings Grant
The Canada Disability Savings Grant is a matching amount paid by the federal government to the Beneficiary’s RDSP. All private contributions trigger the Grant. People can receive the Grant as well as the Bond.
The amount of matching Grant paid to a Beneficiary’s RDSP is determined as follows:
If income is $87,123 or less (2013):
- On the first $500 contributed into the plan, the RDSP will receive $3 for every $1 contributed.
- For the next $1,000 contributed into the plan, the RDSP will receive $2 for every $1 contributed.
Irrespective of contributions, a maximum Grant that can be received in any one year is $3,500, excep where the carry forward of entitlements applies (see below). For incomes below $87,123, a $1,500 contribution triggers a $3,500 Grant.
If income is above $87,123 (2013):
- On the first $1,000 contributed into the plan, the beneficiary will receive $1 for every $1 contributed.
The maximum annual Grant amount in this situation is $1,000 except where the carry forward of entitlements applies.
A beneficiary may receive the full $3,500 Grant one year, and the $1,000 the next year. The amount is completely dependent on income for the tax year two years before the year in question.
The lifetime maximum Grant that can be received is $70,000.
c) Requirements to Receive Federal Contributions
To receive either the Grant or the Bond, the holder must complete the government form: Application for the Canada Disability Savings Grant and/or Canada Disability Savings Bond, which is available through the financial institution or on the government’s website.
To ensure that the Beneficiary receives the maximum amount of Grant and Bond from the federal government, the Beneficiary or the parents in the case of a minor, must file an income tax return for the year two years prior to the contribution and must continue to do so every year thereafter, even if he/she has no income.
In the case of a minor, the Canada Child Tax Benefit must also be claimed, even if it doesn’t result in a net benefit.
When an income tax return is not filed, the government assumes a higher income for the purpose of calculating the matching Grant (87,123) and Bond (43,561). In this situation, the RDSP will receive the lower matching Grant and no Bond. As long as the income tax return is eventually filed, the taxpayer can receive the full amounts of Grant and Bond into his/her RDSP.
To be eligible for the Canada Disability Savings Grant and Bond, RDSPs must be established by the end of the year in which the beneficiary turns 49.
d) Carry Forward Provisions for RDSP Grants and Bonds
Effective 2011, people’s Canada Disability Savings Grant and Bond entitlements back to 2008 can be carried forward. When a person opens an RDSP, Canada Disability Savings Bond entitlements will automatically be calculated and paid into the plan for the preceding 10 years (but not before 2008, when the RDSP was launched).
The government will only make Grant payments on contributions made on or before December 31 of the year in which the beneficiary turns 49, and will only make Bond payments to RDSPs when an application is submitted on or before December 31 of the year in which the beneficiary turns 49. Thus, a Holder must open the plan, and complete the application form, on or before December 31 of the year in which the beneficiary turns 49 in order to establish any carry forward eligibility.
To be eligible for the carry forward from any given year, the test for eligibility must be met:
- The beneficiary must have been a resident of Canada in that year
- The beneficiary must have been DTC eligible for that year (this underlines the importance of asking for DTC eligibility retroactively)
- Taxes must have been filed (for the two years previous) so that the government knows the beneficiary’s family income for that year and can determine the level of eligibility. If taxes are not filed for a given year (remember, two years previous), the entitlement for that year will be 1 to 1 for Grant and no Bond entitlement.
To receive any accumulated Bond entitlement, an application to the Canada Disability Savings Program must be made, and upon receipt of that application the government will pay all accumulated bond entitlements including the current year and ten previous years (but not before 2008).
To receive any accumulated Grant entitlement, a contribution must be made and the application requesting the Grant must be submitted. Upon receipt of that request the government will pay accumulated Grant entitlements starting with the highest and oldest matching rate first to the newest and lowest matching rate last to a maximum of $10,500 in grant.
The RDSP must be registered in order to qualify for any eligibility, including the carry forward. A contract is deemed to be registered on the date that the contract was entered into between the financial institution and the Holder. It may take a bit of time to determine if the Beneficiary qualifies for registration, but this will be retroactive to the date of signature once all information has been determined. At the time of registration the Beneficiary must be DTC eligible and a resident of Canada.
Remember, the beneficiary doesn’t have to have the DTC confirmed when the contract is signed with the financial institution, and DTC can be claimed retroactively up to 10 years.)
Go to: Who is eligible?