Disability Tax Credit
Author: Thomas Guo (CPA, CA, MAcc)
What is the disability tax credit?
The disability tax credit (DTC) is a non-refundable tax credit that helps people with disabilities reduce the amount of income tax they may have to pay. If the disabled person cannot use the tax credit themselves, they have the option of transferring the credit to those that help support them. The disability tax credit can provide significant tax savings to the disabled person or the disabled person’s supporters.
For example, in the 2018 tax year, for a disabled child with no income and is dependent on the parents to provide the basic necessities of life, the disability tax credit will be transferred to one of the parents or it can also be shared among the parents. For the parents, the tax credit for a disabled child could be worth as much as $2,614.32.
Who is eligible?
An individual is eligible for the disability tax credit if they have submitted Form T2201, Disability Tax Credit Certificate, to the CRA and have been approved by the CRA. To complete the form, a medical practitioner has to fill out and certify that the applicant has a severe and prolonged impairment and must describe its effects.
There are different ways for which a person can be eligible for the DTC. The person must meet ONE of the following criteria:
be blind
be markedly restricted* in at least one of the basic activities of daily living**
be significantly restricted*** in two or more of the basic activities of daily living (can include a vision impairment)
need life-sustaining therapy^
In addition, the person's impairment must meet ALL of the following criteria:
be prolonged, which means the impairment has lasted, or is expected to last for a continuous period of at least 12 months
be present all or substantially all the time (at least 90% of the time)
How to claim the disability amount once the DTC application is approved? You can claim the disability amount on your tax return once the person with the disability is eligible for the DTC.
To claim the disability amount for yourself, see line 316 of your tax return.
To claim the disability amount for your dependent, see line 318 of your tax return.
To claim the disability amount for your spouse or common-law partner, see line 326 of your tax return.
If a person was eligible for the DTC for previous years but did not claim the disability amount when they sent their tax return, they can request adjustments for up to 10 years. To claim the disability amount for those prior years, you can ask for a reassessment.
Questions The eligibility and calculation of this credit can be quite complicated. Should you have any questions please feel free to reach out to the author of this article – Thomas Guo, accountant (tgtaxquestions@gmail.com).
Definitions
*Markedly restricted A person is markedly restricted if, they are unable or takes an inordinate amount of time to do one or more of the basic activities of daily living, even with therapy and the use of appropriate devices and medication. This restriction must be present all or substantially all the time (at least 90% of the time).
Inordinate amount of time is a clinical judgment made by a medical practitioner who observes a recognizable difference in the time it takes a patient to do an activity. Usually, this equals 3 times the average time needed to complete the activity by a person of the same age who does not have the impairment
**Basic activities of daily living
Speaking
Hearing
Walking
Eliminating (bowel or bladder functions)
Feeding
Dressing
Mental functions necessary for everyday life
***Significantly restricted
This means that although the person does not quite meet the criteria for markedly restricted, their vision or ability to do a basic activity of daily living is still greatly restricted all or substantially all of the time (at least 90% of the time).
Example: Jane always takes a long time for walking, dressing, and feeding. The extra time it takes her to do these activities, when added together, is equal to being markedly restricted
^Life-sustaining therapy
You must meet both of the following criteria:
The therapy is needed to support a vital function, even if it eases the symptoms.
The therapy is needed at least 3 times per week, for an average of at least 14 hours a week
Source
These presentations are intended for general information purposes only. Audience are recommended to consult with qualified professional to obtain advice and subsequent management for your particular case. The views and opinions expressed by the speakers do not necessarily reflect the policy or position of Assisting in Medical Expectations.
