A Brief Guide to the Child Disability Tax Credit

 

For parents of a child with a disability in Canada there is a welcome form of financial support in the Child Disability Tax Credit. Parents of a child with a disability can receive up to $224.58 per month as assistance from the government. The benefit is meant for parents who have a child with a permanent disability (under the age of eighteen), and is given to parents as a tax-fee benefit. Parents will receive the credit each month to assist them with whatever needs they deem to be important.

There are many benefits to this credit namely that it can co-exist with other forms of support such as grants for services, caregivers, or adaptive technology. Many parents of a child with a disability incur a high degree of costs associated with the nature of their child’s disability. Some of these costs are:

  • Multiple forms of physical, play or other forms of therapeutic therapy
  • A need for various medications (sometimes multiple medications together)
  • Special programs and services
  • Caregivers to assist in the home
  • Specific equipment and adaptive technology
  • Occupational therapy
  • Dental work
  • Psychotherapy for parents and/or family members

In some children who experience a complicated condition such as Fetal Alcohol Syndrome, there will likely be a need for multiple forms of treatments, different medications, long hospital stays, and other complicated needs.

The amount of money parents receive is dependent up on a few factors:

  • The nature and complexity of the child’s disability
  • The parent’s income
  • The nature of the treatments recommended by physicians and other treatment professionals

At Disability Credit Canada, we help your children have the best childhood possible by assisting you in applying for a Child Disability Tax Credit.  The amount you save from paying higher income taxes can now help pay for necessary aid in raising your children with disability. The Child Disability Benefit can help children of all ages, starting from infancy, to attending preschool all the way to high school.

The Child Disability Benefit is home to various programs that help disabled children achieve their full potential. This is funded by the government through our taxes and other resources, as well as partnerships with non-profit charitable organizations and generous donations from private industries. The Child Disability Benefit is administered and given out by the government in various child and family support programs through Service Canada or its Services for Families and Children program. These include:

  • Canada Child Tax Benefit: This is a monthly payment which is tax free to parents with children under the age of 18. For parents with a child who has a disability there is the previously discussed Child Disability Benefit.
  • Child Care Subsidy: This is geared to low-income families who require additional financial services to assist them with the care of their children also under the age of 18.
  • Child Rearing Drop-Out Provision: This is another supplement geared towards parents or caregivers who have a low or zero income. The purpose of this is to remove the burden of making contributions to the CPP or Canada Pension Plan. For these families, the amount of amount they would have to put into the CPP program would have a deleterious effect on them given that they care for a child seven years or younger.
  • Child Support Services: This program is meant to help caregivers to obtain legal agreements or court orders required to secure child support payments. If their spouse is delinquent in his/her payments, this program can help.
  • Universal Child Care Benefits: All Canadian families with young children are eligible for this benefit which pays $100 per child under the age of six.
  • Early Childhood Services and Special Needs: This supplement is geared specifically towards children under the age of six with a disability, who may be eligible for three years of early learning support

All of these benefits combined can be incredibly helpful to parents with a child who has a disability and support them in being more proactive parents.  

Should You Borrow Money From Family?

Just about everybody owes money to somebody at some point.

Look at the average person’s life. They go to college or university, borrowing money for student loans. Then they get out, and need a shiny new car to go with their post-graduation job. So they borrow to buy that. Next comes buying a house, which comes with a massive financial commitment. And throughout it all, many of us struggle with credit card and other debts.

The world runs on debt, especially here in Canada. It’s rare to find someone who is 100% debt free. It’s gotten to the point where we think it’s an accomplishment if someone is debt free besides their mortgage.

Much time and energy is dedicated to helping people get out of debt. Over the years, I’ve seen thousands of tips on how to rid one’s self of debt, with the suggestions ranging from useful to outlandish.

There’s one suggestion I don’t see as often as I should. Many folks should take advantage of borrowing money from their family, especially when paying down high interest debt.

Most people wouldn’t dream of taking this money, saying they’d rather owe a nasty bank than a friendly relative. I’ve never really understood this attitude. Let’s take a closer look at why you should take that loan from your relatives.

The pros

The first pro is as simple as it is powerful. A low interest loan from a sympathetic relative will cost you less in the long run.

I know we’re all independent adults who don’t like accepting charity. We want to pay our own way. But your money doesn’t care about any of that. And when it comes to your money, you should take the path of least resistance.

This is especially true when it comes to credit card debt. Cutting an interest rate from 20% to 2% per year is massive. On $5,000 in debt, that’s a difference of $900 per year.

There’s also the flexibility of paying off a relative. If something happens and you fall behind, a relative should be more understanding than the average banker. You’re nothing but a loan number to a big bank.

Borrowing money from a loved one will also give your credit rating a big boost. Credit reporting agencies all agree; if you pay off a debt, your credit score will go up. That will help someone get more loans in the future, although that’s more of a secondary benefit. Too many people get right back into debt after paying off their current loans.

It can also be advantageous to the relative lending the money. They can get a return comparable or higher than other fixed income sources while taking a reasonable risk with someone they know well. And for many people, helping out a loved one in need is a bigger reward than maximizing their investment returns.

How to lend to a loved one

No matter what side of this transaction you’re on, you need to treat it like a business deal. Anyone borrowing money from a loved one should expect to pay interest, make regular payments, and so on. And these terms should be spelled out in a contract.

Many parents feel uncomfortable doing this, preferring to give junior an interest free loan. That’s a bad idea for a couple of reasons. They’re already doing junior a big favor by cutting the interest rate from 20% to 2%. And interest free loans look too much like gifts to me. It’s easy for their offspring to just not pay it back.

There’s an easy way for parents to protect themselves if their child doesn’t pay back the loan. They can simply instruct their estate to deduct the loan balance from junior’s share of the estate. That might seem a little harsh, but remember, the kid didn’t hold up their end of the bargain.

The rule of thumb when it comes to lending to relatives is to write off the loan from the beginning and treat it as a gift. I agree with that mentality. But steps should be taken to ensure the borrower is very aware the loan isn’t a gift.

Conclusion

I see no problem borrowing money from a loved one, especially if you’re drowning in high interest debt. But remember, it isn’t a gift. You should pay back any loan with the same amount of gusto, no matter what the source. That way you can still show your face at Thanksgiving.