Video: Registered Disability Savings Plan, Canada Disability Savings Grant
Transcript
Canada Disability Savings Grant
The Canada Disability Savings Grant (CDSG) is money that the Government of Canada deposits into a Registered Disability Savings Plan (RDSP) to “match” contributions that are made to the RDSP.
To determine the amount paid, we use:
- the beneficiary’s family income
- the amount of the eligible contribution, and
- available CDSG entitlements in the RDSP
Eligibility criteria
To receive the CDSG, the beneficiary must:
- be a resident in Canada
- be eligible for the Disability Tax Credit (DTC)
- have a valid Social Insurance Number (SIN)
- complete the application form for the CDSG and/or Canada Disability Savings Bond (CDSB)
They must apply for the CDSG, and must make an eligible contribution on or before December 31 of the year the beneficiary turns 49 years of age.
Limits
An RDSP may receive, for a particular year, up to a maximum of $3,500 in CDSG. If there is a carry forward of CDSG, the accumulated entitlements can be as much as $38,500 (current year and 10 previous years). However, the maximum amount of CDSG paid to an RDSP in a particular year is $10,500.
The maximum lifetime CDSG limit paid into an RDSP, on behalf of a beneficiary, is $70,000.
CDSG matching rates
The Canada Revenue Agency (CRA) indexes income levels annually. They use the index income levels to determine the amount of CDSG entitlements available for that particular year.
Also known as the income threshold.
If the beneficiary's family income is less than or equal to the threshold, the matching grant in the particular year will be:
- 300% of the first $500 in contributions
- attracts the CDSG at a rate of $3 for every $1 contributed
- 200% of the next $1,000 in contributions
- attracts the CDSG at a rate of $2 for every $1 contributed
When the beneficiary's family income is greater than the threshold, or if no income information is available at the CRA, the matching grant in the particular year will be:
- 100% of the first $1,000 in contributions
- attracts the CDSG at a rate of $1 for every $1 contributed
Example 100% matching rate
The 2020 taxation year is used to determine entitlements for the CDSG in 2022.
In 2022, Jerome reported a family income of $101,392.
Since his income is above the threshold, he qualifies for the 100% CDSG matching rate on the first $1,000 of contributions made.
With no carry forward amounts available, if Jerome contributes $200 this year, being eligible at the 100% matching rate, he will receive $200 in CDSG.
On the other hand, if he contributes $1,500, at the 100% matching rate, Jerome would receive $1,000 in CDSG since it is the maximum entitlement payable for that particular year.
Same rule applies if he contributes $5,000 at the 100% matching rate. Jerome would receive the same $1,000 in CDSG, which is the annual limit (without considering the carry forward measure).
Knowledge check
Time for a knowledge check.
- Select all that apply for a beneficiary to be eligible to receive the CDSG:
- a. be eligible for the Disability Tax Credit (DTC)
- b. be a resident in Canada
- c. be 59 years old or under
- d. be 50 years old or older
- e. have a valid Social Insurance Number (SIN)
- f. complete the application form for the CDSG and/or CDSB
Answer
The answer is:
- a. be eligible for the Disability Tax Credit (DTC)
- b. be a resident in Canada
- e. have a valid Social Insurance Number (SIN) and
- f. complete the application form to request CDSG and/or CDSB