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Are you eligible for Canada Pension Plan disability benefits?

January 25, 2017

Many Canadians consider the Canada Pension Plan in their retirement plan. What they don’t tend to plan for, is what happens if they get hurt, suffer a serious injury, or get diagnosed for terminal illness.

If you or someone you care for are living with a disability or terminal illness, consider what tax benefits you may be eligible for under the Canada Pension Plan –you might be surprised.

What is Canada Pension Plan disability?

This monthly benefit (CPP-d) is available to people who have made enough contributions to the Canadian Pension Plan,and who are disabled or living with a terminal illness and cannot work a regular job.

If you are eligible and approved, there are no restrictions or designations to the monthly payments of a Canada Pension Plan disability program; you do not have to use these payments for items such as medical or assistive devices or medications.

Canada Pension Plan disability children’s benefit

For those eligible for CPP-d, their dependent children (under-18 or between 18-25, and attending full-time school) may also receive a CPP-d children’s benefit.

How much could you receive?

The CPP-d benefit varies by tax year, but for 2016, the average monthly CPP-d benefit was $934 and up to $1291.

Basically, one would receive a basic monthly fixed amount ($471.43 in 2016), plus an amount based on your CPP contributions for your whole working career.

For the CPP-d children’s benefit, in 2016 there was a monthly flat amount of $237.69.

CPP-d may also be eligible for the Disability Tax Credit (DTC).

How to qualify for CPP-d

There are 3 requirements to qualify for CPP-d:
1) You must be under 65
2) You must have a severe and prolonged disability – meaning your mental or physical disability is long-term, indefinite, or likely to result in death, and regularly prevents you from doing any gainful work
3) You must have either contributed to the CPP in 4 of the last 6 years or 3 of the last 6 years (if you’ve already contributed for minimum 25 years)

Disability Tax Credit

Remember that CPP and CPP-d benefits are both considered a taxable income. If you’re eligible to claim either benefit, the Disability Tax Credit (DTC) can lower the amount of income tax you pay and if you can reduce your income tax payable to zero, you won’t have to pay taxes on the CPP that you collect. You may also transfer any remainder credits to a supporting family member.

Keep in mind the DTC is also retroactive up to 10 years, meaning you could potentially receive a large tax refund (up to $20,000).

Difference between CPP-d and the Disability Tax Credit

If you are trying to figure out what the difference is between the Disability Tax Credit and the Canada Pension Plan disability program, consider it this way: the Canada Pension Plan disability benefit is a monthly income you may receive, while the Disability Tax Credit is a tax credit you may claim on your yearly tax return.

Being qualified for CPP-d doesn’t automatically make you eligible for the DTC or vice versa. The two programs involve separate application and claiming procedures – so keep that in mind because your doctor will be the one to help certify your eligibility for those programs, and the various disability benefit programs can become confusing to anyone.

You can stay up-to-date with our Disability Tax Credit tips and guides by subscribing to our newsletter.

If you need more information about transferring the Disability Tax Credit or Disability Tax Credit eligibility, schedule a call with us and we’ll tell you how it works.

For more information about the DTC, please visit our dedicated information page here.