Video: Registered Disability Savings Plan, Canada Disability Savings Bond

Transcript

Canada Disability Savings Bond

The Canada Disability Savings Bond (CDSB) is an amount that the Government of Canada deposits into a Registered Disability Savings Plan (RDSP) to help low and modest-income Canadians with a severe and prolonged disability save for the future.

No contribution is required to receive the CDSB.

Eligibility criteria

To be eligible to receive the CDSB, the beneficiary must meet the following criteria for each particular year:

• be a resident in Canada
• be eligible for the disability tax credit (DTC), and
• have a valid social insurance number (SIN)

They must apply for the CDSB on or before December 31 of the year the beneficiary turns 49 years of age.

Limits

A Registered Disability Savings Plan (RDSP) may receive, for a particular year, up to a maximum of $1,000 in CDSB entitlements.

If there is a carry forward of accumulated CDSB entitlements, the maximum amount that can be paid in a particular year is up to $11,000.

The maximum lifetime CDSB limit that can be paid into an RDSP on behalf of a beneficiary is $20,000.

Income thresholds

Since no contributions are required to receive the CDSB, the amount of CDSB payable to a beneficiary depends solely on the family income reported.

To determine the family income, an income tax return must be filed each year.

The Canada Revenue Agency (CRA) indexes the income thresholds annually.

If the beneficiary’s family income is less than or equal to the phase out income, or if a beneficiary is under the care of an organization that received a payment under the Children’s Special Allowances Act (CSAA), the beneficiary will be entitled to receive $1,000 in CDSB for that particular year.

If the beneficiary’s family income is greater than the phase out income but less than or equal to the first threshold, they will receive a portion of the $1,000 in CDSB, based on a formula as identified in the Canada Disability Savings Act (CDSA).

Should the beneficiary’s family income be greater than the first threshold, or if no income information is available at the CRA, no CDSB will be paid.

Example: Qualifying for $1,000

If a family filed their taxes and reported an annual income of $24,000, which is less than the phase out income amount of the particular year, or, if a beneficiary is under the care of an organization that received a payment under the CSAA, the beneficiary is entitled to receive $1,000 in CDSB for that particular year.

Example: Qualifying for a portion of $1,000

In this example, to determine entitlements for 2020, the income reported for the 2018-taxation year is used.

William and Karine reported a family income of $35,000. They each have an RDSP.

Since their family income is between the phase out income and the first threshold, the formula as identified in the CDSA determines the amount of CDSB.

With no carry forward amounts available and a family income of $35,000, William and Karine will each receive $804.51 in CDSB into their RDSP.

Beneficiary aged 18 and under

From birth to December 31 of the year the beneficiary turns 18 years of age, the family income used to determine the amount of CDSG and CDSB annual entitlements that the Government of Canada will pay into an RDSP is the income reported by:

• primary caregiver (PCG) family income that is the same income which determined the Canada child benefit (CCB)

The CSAA gives the beneficiary the entitlement during the year the allowance is paid.

Beneficiary aged 19 and over

Starting the year the beneficiary turns 19 years of age, the amount of CDSG and CDSB entitlements in the RDSP will be based on their own family income. This includes the income of their spouse or common-law partner.

Since the CRA uses income reported from 2 years back, the beneficiary should file an income tax return for the year in which they turn 17. This determines their grant and bond eligibility for the year they turn 19. Even if there is no income to declare, the beneficiary would report a $0 income for those years.

Knowledge check

Time for a knowledge check.

1. The maximum lifetime amount that a beneficiary may receive in CDSB is:
   • a. $3,500
   • b. $1,000
   • c. $40,000
   • d. $20,000
   • e. $70,000

Answer

The answer is:

• d. $20,000