Updated for 2024. One common misconception about the Disability Tax Credit (DTC) is that it holds no value for recipients of the Ontario Disability Support Program (ODSP) or other provincial benefits such as Assured Income for the Severely Handicapped (AISH).
While the non-refundable tax credit portion of the Disability Tax Credit is often the focus, otherwise known as a disability tax credit refund, 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 refund 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 includes financial assistance towards 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 when providing the CRA with examples of support.
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 $27,000, if you can go back and retroactively claim the disability tax credit ten years (the maximum length of time you can backfile/retroactively claim the credit), and depending on the province/territory you reside in, as each province has a different provincial supplement.
No family to transfer your disability tax credits to?
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) program.
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 and other provincial benefits, such as AISH.
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, whereas the Disability Tax Credit focuses on a person’s ability to perform the basic activities of daily living (mental functions, walking, getting dressed, bowel/bladder elimination, etc.), and does not include work.
Read more about the Benefits of Getting Approved for the Disability Tax Credit.