The Disability Tax Credit (DTC) is one of the many government programs available to help ease the financial stress of those living with a disability. Despite this, the DTC is one of the more under-utilised credits in Canada. According the Canada Revenue Agency, at least 1.1 million Canadians are eligible for the DTC; however, just half of those who qualify actually access the credit.
Unlike other benefits available to address tax equity, you can not claim the Disability Tax Credit unless you are approved to do so by the CRA. All applicants are required to complete the Form T2201, Disability Tax Credit Certificate. A medical practitioner must also certify you as “suffering from a severe and prolonged mental or physical impairment”.
There are a wide range of medical conditions that are recognised as being eligible. In fact, it may surprise people to know that impairments can include conditions that are not commonly associated with a disability. For example, allergies, sleep apnea, chronic pain, diabetes, addiction, alcoholism and obesity are some of the many recognised conditions. However, whether you qualify is dependent on how your disability impacts your ability to perform your daily routines.
The CRA may approve your Disability Tax Credit Certificate indefinitely, or for a specific period of time. Depending on the date of onset of your condition, you may be able to claim the credit retroactively as far back as 10 years. To claim the credits on a back-dated DTC, you must file a T1Adjustment for each qualifying year. These adjusted filings could result in considerable refunds.
The ability to claim the DTC is not limited to those with the disability. It is also available to relatives you are dependent on for support. If you do not need to claim the full credit to reduce your taxable income to zero, you can transfer all or part of it to the supporting relative. The list of supporting persons who can claim the unused DTC includes a parent, child, brother, sister, aunt, uncle, nephew or niece.
The DTC and its supplemental credit amount changes every year. For 2016, the federal non-refundable Disability Tax Credit for an adult taxpayer is $8,001. For those who are under 18 years of age, the supplemental amount is $4,667, giving them a total DTC of $12,668.
Apart from the thousands in tax savings, you also gain access to other support programs that offer valuable assistance. The Registered Disability Savings Plan (RDSP), the Working Income Tax Benefit (WITB) and the Child Benefit Disability Benefit (CDB) are just a few programs available to DTC approved applicants.
While the application process may seem arduous do not assume your health condition is not serious enough to qualify for the credit. No valid disability is considered minor, and you and your supporting relatives may lose out on valuable tax savings.
There are many programs available to help people with disabilities and their supporting persons. If you want to learn more about the Disability Tax Credit, or other credits and deductions that can help you and your family, contact GB Pilley & Associates Ltd., Chartered Professional Accountants at 604 926 3522.