Are the CPP Disability and Death Benefits Taxable?

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by Enoch Omololu

Published on

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The Canada Pension Plan (CPP) or Quebec Pension Plan as it is referred to in Quebec, is a mainstay of retirement income for Canadian seniors.

While the main CPP retirement pension is the most popular, there are other benefits you can apply for under the program, including the:

All CPP-related benefits qualify as taxable income and I cover this in more detail below.

What is the CPP Disability Benefit?

CPP contributors may qualify for monthly CPP disability benefit payments if they are under age 65 and have made sufficient contributions to the CPP.

To be eligible, they must also:

  • Have a mental or physical disability that regularly stops them from doing any type of substantially gainful work
  • Have a disability that is long-term and of indefinite duration, or is likely to result in death.

If you elected to take CPP early (from age 60-65) and were already receiving the CPP retirement pension for more than 15 months or become disabled after starting to collect CPP and meet the disability requirements, you may qualify for the CPP post-retirement disabilities benefit.

If you are a recipient of CPP disability pension, your dependent children may qualify for a monthly children’s benefit.

The maximum monthly CPP disability benefit amounts paid in 2021 are:

CPP BenefitMonthly Maximum
CPP disability benefit$1,413.66
CPP post-retirement disability benefit$510.85
CPP children’s benefit$257.58

Is CPP Disability Taxable?

CPP disability benefits are taxable. However, the tax owed is not automatically deducted from the monthly payments.

In order to avoid a huge tax bill when you file your income tax return, you can contact Service Canada and ask them to make monthly tax deductions.

You can also complete Form ISP-3520CPP and mail it to your nearest Service Canada office.

The tax you pay includes federal and provincial taxes based on your income tax bracket.

What is CPP Death Benefit?

The CPP death benefit is a one-time payment to the estate of a deceased CPP contributor.

After an eligible contributor had died, the executor named in their will can apply for the death benefit within 60 days after death.

If there is no estate or an executor has not applied for the death benefit, someone else can apply for it in the following order of priority:

  • The person or institution that has paid or will pay the deceased’s funeral expenses
  • The deceased’s surviving spouse or common-law partner
  • The deceased’s next of kin

The CPP death benefit is $2,500.

Is CPP Death Benefit Taxable?

The CPP death benefit is taxable income.

If paid to the estate, the amount should be reported on line 19 of the T3 trust income tax return.

If paid to a beneficiary, the amount should be included on their personal income tax and benefit return (line 130).

A recipient of the CPP death benefit may not be taxed if all the following apply:

  • They are not a beneficiary of the estate
  • They paid the deceased’s funeral expenses
  • The amount of the death benefit does not exceed the funeral expenses
  • There is no property in the estate and the deceased has no heirs

How To Apply

You can apply for both benefits via your My Service Canada Account.

Alternatively, you can also complete the paper application forms and mail them or bring them to a Service Canada office.

For the CPP disability benefit, forms ISP-1151 or ISP-2530A must be completed by you, plus a medical form completed by a doctor or nurse practitioner (form ISP-2519 or ISP-2530B)

Form ISP1200 is required for the death benefit if submitting a paper application.

CPP disability benefit applications can take up to 4 months to process, however, it is expedited to as little as 5 business days when an applicant is suffering from a terminal illness.

Applications for the CPP death benefit take 6-12 weeks.

If you have questions about the status of your application, you can reach Service Canada by phone at 1-800-277-9914 or 1-800-255-4786 (TTY).

Related:

Have questions about either CPP benefit? Leave them in the comments.

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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, Credit Canada, MSN Money, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

1 thought on “Are the CPP Disability and Death Benefits Taxable?”

  1. Hi Enoch,
    I did not know the CPP death benefit was taxable so thanks for clarifying this!
    And what a unique list of items to make it non-taxable. lol
    Steve

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