One misconception many people have about the Disability Tax Credit (DTC) is that it’s of no use to recipients of the Ontario Disability Support Program (ODSP).
One component of the Disability Tax Credit which most people tend focus on is the non-refundable tax credit portion of the Disability Tax Credit. This part of the credit cannot be used directly by an ODSP recipient because it reduces taxes payable and most ODSP recipients do not have any taxes payable. That does not mean that someone on ODSP cannot take advantage of the many other benefits of Disability Tax Credit has to offer.
Even if the Disability Tax Credit cannot be used while on ODSP, it can be transferred to a relative who has provided assistance. The relative could be a common law spouse, sibling, aunt, uncle, son, daughter, parent, grandparent, or grandchild.
The assistance has to be in the form of what the Canada Revenue Agency (CRA) calls the ‘basic necessities of everyday life.’ The CRA has defined this to mean financial assistance towards either food, shelter, or clothing expenses. It’s important to note that assistance has to be provided in only one of the three categories, not all three.
The support provided has to be in the form of financial assistance towards at least one of those three things (food, shelter, clothing). The support must be provided in the years you want to transfer your disability tax credits. The CRA do not often request receipts, although they can. What they will often do is send you a letter requesting further information about the amount of support provided and what month and year it was given. You should provide as many details as you possibly can.
By getting approved for the disability tax credit and transferring your credits to a relative, you could be putting significant savings into your family members pocket, as much as $22,000 in some cases.
If you have don’t have a relative to transfer your disability tax credits (DTC) to, you should still get approved for the disability tax credit because you can likely make use of the Registered Disability Savings Plan (RDSP).
Registered Disability Savings Plan (RDSP) and Disability Savings Bonds
Being approved for the Disability Tax Credit also allows ODSP recipients to take advantage of the Registered Disability Savings Plan (RDSP). If you are on ODSP and approved for the disability tax credit then you should be able to make use of the Disability Savings Bond.
The Disability Savings Bond is a $1,000 bond given to Canadians with disabilities who setup a RDSP and have a low to modest income, which unfortunately includes ODSP recipients. The $1,000 bond will be provided every year, until you reach either the lifetime benefit maximum of $20,000 (20 years) or the age of 50.
It should also be noted that money provided by the Registered Disability Savings Plan (RDSP), Disability Savings Bonds and Disability Savings Grants are exempt from $6,000 ODSP asset limit.
If you are on ODSP it is worth getting approved for the disability tax credit (DTC). If you cannot transfer your non refundable tax credit portion of the disability tax credit you can still most likely take advantage of the registered disability savings plan (RDSP).
To read more about the RDSP, check out What is the RDSP?
It should be noted that the eligibility criteria for the Disability Tax Credit and ODSP are completely different. Eligibility criteria for ODSP focuses primarily on an individual’s ability to work.
In order to qualify for the Disability Tax Credit one must be restricted 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 not sure if you qualify, you can get a Free Disability Tax Credit Assessment.