Qualifying for an RDSP with Type 1 diabetes
By ATB Wealth 12 July 2022 2 min read
Why isn’t this common knowledge for people living with Type 1 diabetes?
There are a few common reasons why people who live with Type 1 diabetes, are not aware they may qualify for an RDSP or a DTC.
You didn’t think you could qualify. Type 1 diabetes isn’t a physically obvious medical condition, except for the pokes on your fingers or somewhat noticeable insulin pump. Most individuals with the condition wouldn’t necessarily consider themselves disabled. Type 1 diabetes is a condition that requires careful management, but the physical limitations are often minimal compared to other medical conditions.
You had never heard of an RDSP or DTC until you stumbled across this article. Or maybe you had a vague idea of what they were, but no idea they were a benefit you could take advantage of.
You didn’t know that to get an RDSP, you need to qualify for the DTC first. Opening an RDSP is a process that requires one step at a time. The first step is to learn more.
What is a Registered Disability Savings Plan (RDSP)?
An RDSP is a long-term registered savings plan to help people living with significant physical restrictions or prolonged medical conditions save for their future. In addition to your own contributions to the plan, the federal government will also deposit the Canada disability savings grant and the Canada disability savings bond (if eligible) into your RDSP. This means the government may match your contributions to the plan by up to 300 per cent, depending on your adjusted family net income. These grants and bonds paid into the plan—as well as the RDSP earnings—grow on a tax-deferred basis until withdrawals are made from the plan.
General eligibility requirements for RDSPs
To be eligible as a beneficiary of an RDSP when the plan is opened you must:
- Be eligible for the Disability Tax Credit
- Have a valid Social Insurance Number (SIN)
- Be under the age of 60
- Be a resident of Canada
If you are a parent of a child living with Type 1 diabetes, you may hold the RDSP for your child until they are 18 years old.
What is a Disability Tax Credit (DTC)?
To qualify for an RDSP you must also be eligible for the DTC. The DTC is a non-refundable tax credit that may reduce tax that people with disabilities and prolonged medical conditions must pay.
Under the eligibility guidelines of the CRA, individuals living with Type 1 diabetes may qualify for a DTC by claiming the medical condition as “life sustaining therapy.” To do so, you must have a medical practitioner sign off on a T2201. Historically, this included a requirement that you spend an average of 14 hours per week managing your diabetes or assisting your child with their diabetes management. Beginning in 2021, individuals who have been diagnosed with Type 1 diabetes are now automatically deemed to meet this requirement.
Where do I start?
Applying for an RDSP may seem overwhelming, but don’t worry, there are plenty of helpful resources. The ATB Wealth RDSP Reference Guide provides a full explanation of all things RDSP and DTC related. Diabetes Canada is also a helpful resource.
When you’re ready to get your RDSP set up, a financial advisor can walk you through the process and answer any questions you may have.
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