Disabled may be missing tax breaks
Talbot Boggs
(Special) - A recent report by Human Resources and Skills Development Canada had some disturbing revelations about the number of disabled people in Canada. It's rising.
Between 2001 and 2006, the overall disability rate in Canada rose to 14.3 per cent from 12.4 per cent in all age groups, but particularly among adults over 65. One in seven Canadians now has a disability.
Cleo Hamel, Senior Tax Analyst with H&R Block, says many Canadians suffering from disabilities do not take advantage of the Disability Tax Credit, which can result in a significant tax savings for them.
"A lot of people don't make claims for the credit either because they don't know about it or they just don't want to admit that they have a disability," says Hamel.
The Disability Tax Credit is a non-refundable credit used to reduce income tax payable for eligible individuals, who must meet three conditions - they must have a severe impairment in physical or mental functions, the impairment must be prolonged, which means it has lasted or is expected to last for a continuous period of 12 months, and a qualified practitioner must certify that the impairment is severe and prolonged and complete Form T2201, detailing the effects of the impairment on the basic activities of everyday living.
If you are eligible for this credit but can't use all or part of it because you have no taxable income, you can transfer it to your spouse, common-law partner or other supporting person.
A supporting person may be able to claim all or part of a dependent's credit providing that both the supporting person and the dependent were residents of Canada during the tax year.
Hamel says many people may not know about the tax credit, which can be retroactive for 10 years in the past. The 2009 tax credit limit is $7,196, which could result in a tax savings of $1,079. But Hamel says she has seen retroactive claims for as much as $18,000.
Any individual who is eligible for the Disability Tax Credit, is a resident of Canada, under the age of 60 and has a social insurance number can establish a Registered Disability Savings Plan, a program that gives families a way to provide for the future financial security of their loved ones with disabilities. In the case of a minor child, a parent or guardian can establish and direct the plan.
The RDSP was originally introduced in the 2007 federal budget and started to become available at financial institutions late in 2008. Over time, the RDSP is expected to help an estimated 500,000 disabled Canadians and their families plan for and
An RDSP works much like a Registered Education Savings Plan (RESP). Money invested in the plan is allowed to grow tax-free until it is withdrawn. There is a $200,000 lifetime contribution limit but no limit on annual contributions.
Contributions can be made by the individual, any family member or friends and there are no restrictions on when the funds can be used and for what purpose, as long it is for the beneficiaries benefit.
The program also provides grants and bonds for lower income families, based on the family's net income.
Upon withdrawal, the income, the grant and the bond are taxed in the hands of the beneficiary, usually at a lower rate.
The RDSP grant is designed for families in lower to middle income tax brackets and includes a federal contribution.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors. (boggsyourmoneyrogers.com)
Copyright 2010 Talbot Boggs
