Canada disability savings grant and Canada disability savings bond
Canada disability savings grant
The grant is an amount that the Government of Canada pays into an registered disability savings plan (RDSP). The Government will pay matching grants of 300%, 200%, or 100%, depending on the beneficiary’s adjusted family net income and the amount contributed. The beneficiary’s adjusted net family income is calculated as follows:
- From birth to December 31 of the year the beneficiary turns 18, the beneficiary’s adjusted family net income is based on the income information used to determine the Canada child benefit (CCB) for that beneficiary
- Beginning the year the beneficiary turns 19 until the RDSP is closed, the beneficiary’s adjusted family net income is based on their income plus their spouse’s, or common-law partner’s income.
- If the beneficiary is under the care of a department, agency, or institution for at least one month in the year, the adjusted family net income is based on the allowance payable to the department, agency, or institution under the Children’s Special Allowances Act.
An RDSP can get a maximum of $3,500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime. A beneficiary's RDSP can receive a grant on contributions made until December 31 of the year in which the beneficiary turns 49.
The amount of the grant is based on the beneficiary’s adjusted family net income as follows: The beneficiary adjusted family net income thresholds are indexed each year to inflation. The income thresholds shown are for 2021.
Amount of CDSG grant when family income is $98,040 or less:
- on the first $500 contribution—$3 grant for every 1 dollar contributed, up to $1,500 a year
- on the next $1,000 contribution—$2 grant for every 1 dollar contributed, up to $2,000 a year
Amount of CDSG grant when family income is more than $98,040:
- on the first $1,000 contribution—$1 grant for every 1 dollar contributed, up to $1,000 a year
Canada disability savings bond
The bond is an amount paid by the Government of Canada directly into an RDSP. The Government will pay a bond of up to $1,000 a year to low-income Canadians with disabilities. No contributions have to be made to get the bond. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49.
The amount of the bond is based on the beneficiary’s adjusted family net income as follows: the beneficiary family income thresholds are indexed each year to inflation. * The income thresholds shown are for 2021.
Beneficiary's adjusted family net income:
- $32,028 or less (or if the holder is a public institution)—Bond $1,000
- between $32,028 and $49,020*—Part of the $1,000 is based on the formula in the Canada Disability Savings Act
- more than $49,020*—No bond is paid
Carry forward of unused grant and bond
Before the end of the year you turn 49 years of age, you can carry forward up to 10 years of unused grant and bond entitlements to future years, as long as you met the eligibility requirements during the carry-forward years (for example, if you were eligible for the disability tax credit and you were a Canadian resident). RDSP became available in 2008. If an RDSP was opened:
- in 2021, the carry forward period would be from 2011 to 2021;
- in 2015, the carry forward period would be from 2015 to 2025.
The grant and bond will be paid on unused entitlements up to an annual maximum of $10,500 for the grant and $11,000 for the bond.
Employment and Social Development Canada (ESDC) administers the grant and bond programs. ESDC bases the amount of the grant and bond that are available for any particular year on the beneficiary’s family income, as well as on matching rates.
Example - How to carry forward unused grant and bond entitlements
Let us take Roger for example:
- He is a person with a disability.
- His income has been less than $15,000 each year since 2008.
- He has been eligible for the disability tax credit (DTC) each year since 2008.
- He is not, and has never been, a holder or beneficiary of an RDSP.
- He has reached the age of majority and is contractually competent to enter into a plan.
In August 2021, Roger opens an RDSP. Although opened in 2021, Roger’s plan has accumulated grant and bond entitlements over the past 10 years, going back to 2011 since RDSPs became available in 2008.
The following is a breakdown of Roger’s accumulated grant and bond entitlements:
- $1,500 in grant entitlements per year at the 300% matching rate ($1,500 x 10 years for a total of $15,000)
- $2,000 in grant entitlements per year at the 200% rate ($2,000 x 10 years for a total of $20,000)
- $1,000 in bond entitlements per year ($1,000 x 10 years for a total of $10,000)
Upon application for his bond, his RDSP will receive $10,000 in accumulated bond entitlements.
After the RDSP is opened, with Roger’s written consent, his family contributes $800 to his RDSP in October 2021, for which his RDSP receives $2,400 ($800 × 300%) as a grant.
Roger carries forward $12,600 ($15,000 - $2,400) in unused grant entitlement at the 300% rate and still carries $20,000 in unused grant entitlement at the 200% rate.
When do grants and bonds have to be repaid?
10-Year Repayment Rule
If any of the following events occur, all government grants and bonds paid into the plan during the preceding 10 years before the event must be repaid to the Government of Canada. Repayments are required when any of the following conditions applies:
- the RDSP is terminated
- the plan ceases to be an RDSP
- the beneficiary dies
To ensure the funds in an RDSP are available to meet potential obligations under the 10-year repayment rule, RDSP issuers must set aside an “assistance holdback amount” equal to the total grant and bond paid into the RDSP in the preceding 10 years less any grant and bond already repaid in respect of that 10-year period. When one of the events described above occurs, the required repayment is equal to the amount of the assistance holdback amount immediately preceding the event.
A beneficiary with a life expectancy of five years or less will be allowed annual RDSP withdrawals of up to $10,000 in taxable plan savings, as well as a pro-rated amount of plan contributions, without having to repay the grants or bonds paid into the plan in the preceding 10 years. These rules only apply when an election to be an specified disability savings plan (SDSP) has been filed with the RDSP issuer by the holder of the RDSP and the issuer has notified ESDC of the election.
A rule applies for withdrawals made from an RDSP after 2013. This rule replaces the 10-year repayment rule only for RDSP withdrawals. The former 10-year repayment rule will continue to apply where the RDSP is terminated or deregistered, the RDSP beneficiary stops being eligible for the DTC without filing an election, or the RDSP beneficiary dies
This rule may change due to legislation. For the most updated information on the 10-year rule, contact the issuer of your RDSP or go to ESDC.
Proportional repayment rule
As of 2014, the proportional repayment rule applies on the event where an amount is withdrawn from the RDSP. The proportional repayment rule will require that, for each $1 withdrawn from an RDSP, $3 of any grants or bonds paid into the plan in the 10 years preceding the withdrawal be repaid, up to a maximum of the assistance holdback amount. Repayments will be attributed to the grants or bonds that make up the assistance holdback amount based on the order in which they were paid into the RDSP. The proportional repayment rule may be change due to legislation.
For the most updated information on how much the repayment will be, contact the issuer of your RDSP or go to the ESDC website.
Jeff opens an RDSP in 2016 and contributes $1,500 to his plan annually, being eligible for the maximum grant ($3,500) for each year. In 2021, the assistance holdback amount for his plan equals $21,000 (6 years, 2016 to 2021 inclusively. multiplied by $3,500).
In 2021, he withdraws $600 from his RDSP. Under the 10-year repayment rule, the entire assistance holdback amount ($21,000) would have to be repaid. Under the proportional repayment rule, $1,800 of the assistance holdback amount will be repaid (approximately 9% of the repayment required under the former 10-year repayment rule). The $1,800 repayment will come from the grants paid into his RDSP in 2016 and the plan’s assistance holdback amount will be reduced to $19,200.
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