Disability Tax Credit vs. Other Disability Benefits in Canada: A Comparative Guide
DTC, Disability Tax Credit, is a significant disability benefit for those with impairments, helping them enjoy tax relief. However, there are also other programs, like CPP Disability and RDSP. If you want to compare Disability Tax Credit with other disability benefits in Canada, understand which one suits you better. We’ve got you covered in this ultimate guide. So, without any further ado, let’s begin exploring!
Disability Tax Credit vs CPP Disability
When comparing disability benefits Canada, DTC and CPP Disability are the first ones to pop in mind. While both of these programs offer significant support, they have distinct eligibility criteria, benefits, and application processes.
Purpose and Nature of Benefits
DTC is a non-refundable tax credit mainly designed to reduce the income tax burden for those suffering from prolonged impairments. It doesn’t offer direct cash payments. Instead, it helps lower taxable income. You can even receive a retroactive tax refund for up to 10 years.
On the other hand, CPP Disability offers direct financial support to individuals who have contributed to the Canada Pension Plan (CPP) and are now unable to work due to a severe and prolonged disability. It’s provided on a monthly basis, and the amount received depends exclusively on the individual’s contributions to the CPP during their working years.
Eligibility Criteria
DTC eligibility requirements focus on the severity and impact of an impairment on the daily life activities of the individual. The application form must include the fact that the medical disability has lasted or is expected to last up to 12 months. Conversely, CPP Disability requires that the applicant make sufficient contributions to CPP and is unable to work due to a disability that is both severe and prolonged.
Application Process
DTC application includes Form T2201, which must be filled by the patient’s medical practitioner and submitted to the Canada Revenue Agency (CRA). Once approved, the applicant can avail retroactive tax credits for up to 10 years. On the other hand, the CPP Disability application involves medical documentation and work history and is submitted to Service Canada. The approval may take several months. You might even need to request an appeal if your application was initially denied.
Disability Tax Credit and RDSP
Registered Disability Savings Plan, RDSP, is also a key financial support program for disabled persons in Canada. Here is how it compares with the DTC:
Purpose and Nature of Benefits
RDSP is a long-term savings plan that offers financial security to those with disabilities. It enables individuals to save for their future while benefitting from government grants and bonds. On the other hand, Disability Tax Credit is a non-refundable tax credit that relieves the tax burden for those with prolonged disabilities.
Eligibility Criteria
As mentioned earlier, DTC requires individuals to have impairments that last or are expected to last 12 months. It focuses more on how the daily life of that individual is being impacted by their disability – comparing that to those with no disabilities. For instance, one eligibility requirement is that you perform tasks 3 times slower than those with no disabilities.
On the other hand, RDSP requires that the individual is DTC-approved. This means that if you plan on opening an RDSP, you must first qualify for the DTC. Additionally, you must be a Canadian resident under 60 years of age with a valid Social Insurance Number (SIN).
Application Process
DTC application can ensure retroactive tax credits for up to 10 years. Whereas RDSP enables individuals to save for their future while also benefiting from government grants and bonds. For instance, the Canada Disability Savings Grant (CDSG) matches contributions up to 300%, and the Canada Disability Savings Bond (CDSB) provides extra funds for low-income individuals. That said, an RDSP can accumulate up to $200,000 in savings over a lifetime.
Disability Tax Credit (DTC) vs. Other Disability Benefits in Canada
By now, you have explored the detailed differences between DTC and the two main disability programs. Let’s now analyze how it differs from others:
DTC vs. Provincial Disability Assistance Programs
Every Canadian province offers its disability program, like the Ontario Disability Support Program (ODSP) and British Columbia’s Disability Assistance (PWD). They offer monthly financial assistance to help a disabled person deal with their basic living expenses, medical, and housing costs. The key difference between this program and DTC is that DTC is primarily tax relief, whereas provincial disability programs provide ongoing income support.
DTC vs. Workers’ Compensation Benefits
Worker’s compensation benefit programs, like WSIB in Ontario or WCB in Alberta, offer support to individuals struggling with disabilities due to work-related injury. These benefits offer wage replacement, medical benefits, and rehabilitation support. The key difference with the DTC is that DTC applies to any disability, whereas workers’ compensation is strictly for work-related impairments.
DTC vs. Canada Disability Benefit (CDB)
Canada Disability Benefit (CBD) is a new federal disability benefit program (not launched yet). It’s planned to offer direct monthly financial support to low-income individuals with disabilities. On the other hand, DTC helps with tax relief.
Wrapping It Up!
DTC is an important tax relief for those struggling with prolonged disabilities. However, it differs slightly from other disability programs. For instance, CPP offers monthly support, and RDSP is a long-term savings plan, whereas DTC helps reduce taxable income. By reviewing these basic differences and weighing your eligibility requirements with the perks offered, individuals can find the best possible disability fund for their needs. Hope you find this info worth reading.
