Move over Thanksgiving – this October marks the second annual RDSP Awareness Month, an initiative announced by the BC government to promote awareness and uptake on the Registered Disability Savings Plan (RDSP). For the uninitiated, the RDSP is a groundbreaking way for people with disabilities and their families to save for their future.
The RDSP is unique because the Federal Government is willing to contribute tens of thousands of dollars, up to $90,000, to the RDSP over a person’s lifetime. Is there a catch? Well yes, a few actually, but that hasn’t deterred British Columbians from contributing more than $148 million dollars to their RDSPs. Keep in mind that the RDSP is a long-term savings plan and you need to be prepared to leave money in your RDSP for 10-20 years or you risk losing much of the benefits of the plan.
To be eligible, you have to qualify for the disability tax credit (DTC) which requires you to complete and submit a T2201 disability tax credit certificate to the CRA and have them confirm that you are eligible to claim the disability tax credit. The eligibility criteria for the DTC are different than for Provincial disability benefits. There’s a self-assessment questionnaire on the T2201 certificate that you can use to get a sense of whether you might qualify. Disability Alliance BC also offers an RDSP helpsheet which explains more details about the DTC and RDSP. In addition to qualifying for the DTC, you also have to:
- have a valid social insurance number,
- be up-to-date on your taxes,
- be a Canadian resident, and
- be under 50 (for the Federal government to make contributions to your RDSP),
To be able to get the full benefit of the RDSP.
Once you’ve qualified for the DTC you can open up an RDSP. Most major banks and credit unions offer the RDSP and you will likely need to book an appointment at the bank or credit union of your choice. You will have to decide when you open up your RDSP how you want to invest the money that goes into the account. Most financial institutions will offer a range of options based on your tolerance for risk and your financial goals. Most financial institutions will also take care of applying for Federal government contributions on your behalf.
Speaking of Federal government contributions, there are two ways the government contributes to RDSPs. The first is a grants program which matches individual contributions to RDSP’s at a rate of up to 3:1. This means that for each dollar you put into an RDSP the Federal government will contribute $3 in return on your first $500 of contributions in a year. Even if you can’t afford to contribute to the RDSP you can still benefit from the bonds program which provides contributions of $1,000 to an RDSP if your income was under $26,021. The Federal government will contribute up to $70,000 in grants and $20,000 in bonds over your lifetime.
For many people with disabilities, the RDSP has the potential to be life-changing. Relative to other Provinces, BC has a good uptake rate on the RDSP, with an estimated 11% of eligible British Columbians having started an RDSP. That means there’s still up to 89% of us who could stand to benefit. If you are one of that 89%, I strongly encourage you to spend some time looking into whether the RDSP might be for you. There are various resources available from Disability Alliance BC and other organizations which provide a more detailed look at the ins and outs of the RDSP.
If you need to get caught up on income taxes to benefit from an RDSP, remember that people on Provincial disability benefits (PWD or PPMB) can contact Tax AID DABC to ask for help getting caught up.
Thanks for reading! Our next post is scheduled for October 30.