Updated June 2023. One common misconception about the Disability Tax Credit (DTC) is that it holds no value for recipients of the Ontario Disability Support Program (ODSP).
While the non-refundable tax credit portion of the Disability Tax Credit is often the focus, ODSP recipients typically don’t have any taxes payable, so they can’t directly benefit from this part of the credit. However, this doesn’t mean that individuals on ODSP cannot leverage the other benefits offered by the Disability Tax Credit.
Even if the Disability Tax Credit cannot be utilized while on ODSP, it can be transferred to a relative who has provided assistance. Eligible relatives include common-law spouses, siblings, aunts, uncles, sons, daughters, parents, grandparents, or grandchildren.
The assistance must fall under what the Canada Revenue Agency (CRA) defines as “basic necessities of everyday life,” which encompass financial aid for food, shelter, or clothing expenses. It’s important to note that support needs to be provided in at least one of these categories, not all three.
The support should be in the form of financial assistance for one of the mentioned necessities (food, shelter, clothing) during the years in which you want to transfer your disability tax credits. While the CRA doesn’t typically ask for receipts, they may request additional information regarding the amount of support provided and the specific month and year. It is advisable to provide as many details as possible.
By obtaining approval for the disability tax credit and transferring your credits to a relative, you can potentially provide significant savings to your family member, potentially reaching up to $22,000 in certain cases.
If you don’t have a relative to transfer your disability tax credits to, it is still important to get approved for the disability tax credit as an ODSP recipient. This approval makes you eligible to benefit from the Registered Disability Savings Plan (RDSP).
The RDSP allows ODSP recipients approved for the Disability Tax Credit to take advantage of the Disability Savings Bond. This bond is a $1,000 amount granted annually to Canadians with disabilities who establish an RDSP and have a low to modest income, which includes ODSP recipients. The $1,000 bond continues to be provided every year until either the lifetime maximum of $20,000 (20 years) or the age of 50 is reached.
Additionally, funds provided through the Registered Disability Savings Plan (RDSP), Disability Savings Bonds, and Disability Savings Grants are exempt from the $40,000 asset limit imposed by ODSP.
For ODSP recipients, it is worthwhile to obtain approval for the disability tax credit (DTC). If you cannot transfer the non-refundable tax credit portion, you can still likely benefit from the registered disability savings plan (RDSP).
It’s important to note that the eligibility criteria for the Disability Tax Credit and ODSP are completely distinct. ODSP eligibility primarily focuses on an individual’s work capacity.
To qualify for the Disability Tax Credit, individuals must have restrictions in one of the activities of daily living outlined by the Canada Revenue Agency (CRA) in the T2201 Disability Tax Credit Certificate. If you’re uncertain about your eligibility, you can undergo a Free Disability Tax Credit Assessment.