In a similar way, accessing financial supports available for those with diabetes can boost your finances. Government-sponsored programs allow Canadians with different health conditions to get some extra financial help. Two main programs are available to those with diabetes – the Disability Tax Credit (DTC) and the Registered Disability Savings Program (RDSP). If you are not taking advantage of them, you are missing out on free money from the government. Your endocrinologist and the Canada Revenue Agency can help assess your eligibility.
This program allows you to take a portion of your income off your taxes. You then receive a yearly tax refund. It works a bit like an RRSP contribution. When you submit your taxes each year, look for the DTC line. If you are eligible in 2015, you will be able to deduct $7,899 off your taxes for this tax year. Let’s say your income is $32,020, the median individual income in Canada in 2013. If you have diabetes and can use the DTC, once you file your taxes you would take $7,899 of your income. This brings your taxable income down to $24,121, resulting in a tax refund of $1,837!
You can use this refund any way that you want. Some people prefer to save it up to buy more expensive equipment such as a pump, or insulin for the pump. An average pump costs between $6,000 to $8000, with monthly costs between $250 to $300. Your tax return can often pay for the remaining costs that insurance does not cover.
Alternatively, if you simply place your DTC returns in an investment account each year, you could accumulate significant savings over time (see table). At 4.5 per cent, an investment account could grow to over $250,000 over the course of 40 years.
If you were eligible for the DTC in past but did not apply for it, it is not too late to benefit. Often, people are not aware of the large amount of tax refunds available simply by applying for them. If you might qualify, talk to your accountant about the DTC. If you were eligible, you can still adjust your taxes for up to the past 10 years.
The return available to you will depend on your past income. Let’s assume that you earned the same median income of $32,020 each year. Some individuals could be eligible for a refund of $1,827 x 10 years, or roughly $18,270.
Now that you know about the DTC, you can benefit from it in two ways – by adjusting your previous returns, and continuing to deduct DTC savings on returns you file in future.
The RDSP is available to anyone who has already qualified for the DTC, the Government of Canada will deposit money into this savings account for you every year. This program is not related to your tax return. Instead, it is a registered savings account. The account is tax-deferred, meaning that any growth that happens within the savings account does not affect your tax return until you withdraw the funds. This is the same way that the RRSP works, and helps individuals plan for the future. The government deposits money into your account using bonds or grants.
Bond payments are based on your household income and are designed to help low-income households save money. If your household income is between $0 to $25,584 after deductions, you will qualify for $1000 in bond payments per year. If your household income is between $25,584 to $43,953, you qualify for a bond between $1000-1 based on a sliding scale. The lifetime maximum for bond payments is $20,000.
As with the DTC, you may be eligible for up to the past 10 years of missed bond payments. If you have had diabetes for a while, talk with your financial advisor. Many people who have had diabetes for 10 years are unaware that they could be owed thousands of dollars because they never applied for their RDSP.
Household Income Bond Amount
|$0 to $26,021
|$26,021 to $44,701||$1,000-0|
|Data was compiled using 2015 Canada Revenue Agency rules.|
Grants are based on matching personal contributions you make to the RDSP. As long as your household income is below $89,401 after deductions, you are eligible for up to $3500 a year in government grants. The government will match the first $500 you deposit at a 3-1 ratio. The next $1000 you deposit will be matched on a 2-1 ratio.
In total, if you deposit $1500 in one calendar year, the government will deposit $3500 for a total of $5000 in deposits.
|Data was compiled using 2015 Canada Revenue Agency rules.|
Even if your household income is above $89,401, the government will still match the first $1000 deposited at a 1-1 ratio for a total of $2000 deposited per year.
As with the DTC and the bond payments, you can still access grant payments that you might have earned in past years. If you have never contributed to the RDSP but were eligible for the past 10 years, the government is happy to contribute the available $35,000 to your savings account to a maximum of $10,000/year. Just as with the bonds, the grants have a lifetime maximum of $70,000.
There is one catch to applying for the free money available through an RDSP. All funds that are deposited must be locked away for 10 years. Let’s say you contribute $500 to your RDSP today, and the government deposits $1500 in grants and $1000 in bonds. The combined $3000 in the RDSP will be locked until 2026, on the day the deposits were made.
In the same way that good diabetes management keeps you healthy, applying for the DTC and RDSP can bring financial peace of mind. Take the time now to access these government-sponsored financial supports.
Eligibility is limited to people with type 1 diabetes who are spending 14 hours per week on life-sustaining activities such as monitoring glucose levels, administering insulin, calibrating equipment, and maintaining a logbook of glucose levels. As eligibility for the DTC is based on the 14 hours spent per week on life-sustaining activities, new technology has disqualified some from continued eligibility for the DTC. Your endocrinologist can help you decide if you qualify or not.
If your tax services office is located in: Send your form or letter to the Disability Tax Credit Unit at the following address:
British Columbia, Regina, or Yukon
Surrey Tax Centre
9766 King George Boulevard, Surrey BC, V3T 5E1
Alberta, London, Manitoba, Northwest Territories, Saskatoon, Thunder Bay or Windsor
Winnipeg Tax Centre
66 Stapon Road, Winnipeg MB R3C 3M2
The RDSP is offered at most major banks and credit unions. Talk to your financial advisor to see if you are eligible to open an account. You must have already qualified for the DTC before you can qualify for the RDSP.