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Disabled Workers Receive Disability Tax Credit, not CPP

October 02, 2013

What is the relationship between the Disability Tax Credit and Canada’s Pension Plan (CPP)? Both are disability support programs but the similarities stop there. The Disability Tax Credit increases in value when an individual is able to work. This results in annual tax returns as well as substantial retroactive payments. On the other hand, CPP offers income replacement to people with disabilities who cannot pursue gainful employment.


This is not to say a person can’t be enrolled in both programs. It is, however, more likely that a person will benefit from one or the other. For those who are able to earn a taxable income or can transfer the tax credit to a supporting person, it is highly valuable to receive the Disability Tax Credit.

Still, there are many people who are misinformed about what each program does. In addition, a bigger question looms: why can’t the programs exist in harmony the one another?

Can the Disability Tax Credit and CPP exist in Harmony?

The Disability Tax Credit and CPP are two separate programs administered by two government entities. This makes sense when understanding that each program offers different benefits. But it remains confusing because they are both offering government assistance to people with disabilities.

To offer one clarification, it is appropriate to state that people who receive CPP are unable to work due to disability. People who receive the Disability Tax Credit either earn an income or transfer the credit to a supporting person who does. Annual savings are distributing to these individuals during tax season, in the spring time. They can also claim retroactive payments anytime – up to $40,000.

But Both Programs Benefit People with Disabilities…

Despite different offices offering these disability support programs, many Canadians feel these application processes should be united. After all, filling out CPP forms and the Disability Tax Credit Certificate can seem monotonous. The Coalition for Disability Tax Credit Reform emphasizes that this is a reason why CPP and the Disability Tax Credit ought to exist in harmony. Nevertheless, even if the application processes become similar, it is still unlikely that people will benefit from more than one program.

The Disability Tax Credit and CPP have Different Purposes

Ultimately, the Disability Tax Credit and CPP serve different purposes. The Disability Tax Credit recognizes the burden of medical expenses on disabled workers. Therefore, it offers tax breaks that free up some funds so the individual can pay for medicine, medical consultations, and therapies. The alternative program, CPP, provides an “income replacement” for someone who cannot work because of disability.

This is why eligibility requirements are different for each program. To use the disability amount on a tax form, a person must submit a successful Disability Tax Credit Certificate which states how he or she is markedly or significantly restricted in daily living tasks. CPP benefits are available to those who, due to disability, are incapable of securing gainful employment.

Because CPP is income replacement, the monthly amount can be dismal. By applying for the Disability Tax Credit there are larger annual savings that increase when a person has the ability to earn an income. It also is transferable, meaning a supporting person who supplies basic necessities (like food, clothes, and shelter) can claim the tax credit going forward and for the past 10 years.

Canada has one of the best disability support programs in the world because it rewards people who can work. However, the Disability Tax Credit is not only for those with gainful employment. Without work, a person can qualify for the Disability Tax Credit or CPP. While it is rare to be enrolled in both programs, it is possible to choose the more lucrative option. The Disability Tax Credit offers long-term substantial benefits and large sums of money CPP does not.

Image made available by SpaceShoe [Learning to live with the crisis] on Flickr through Creative Common Licenses.

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