Looking to maximize your tax savings in Canada? If you or a loved one are living with a disability, you may be eligible for the Disability Tax Credit in Canada. The DTC is designed to provide financial relief to individuals who face significant impairments in their everyday lives. But navigating the complex world of tax credits can be overwhelming. That’s where we come in. From understanding the eligibility criteria to gathering the necessary documentation, we’ve got you covered. So, if you’re ready to discover how the Disability Tax Credit can help you save on your taxes and improve your financial well-being, let’s dive right in!
Understanding the Disability Tax Credit (DTC)
The Disability Tax Credit (DTC) is a federal tax credit available to Canadians with disabilities. It is designed to provide financial assistance to individuals who have a “severe and prolonged impairment” in physical or mental functions. The credit aims to help offset the additional costs associated with living with a disability, such as medical expenses, specialized equipment, and support services.
To qualify for the DTC, you must meet certain criteria set by the Canada Revenue Agency (CRA). These criteria include having a disability that significantly restricts your ability to perform one or more basic activities of daily living, which include walking, getting dressed, eating/meal preparation, elimination (bowel/bladder), hearing, speaking, vision, life-sustaining therapy (think dialysis or other treatments), mental functions necessary for everyday living, and last but not least cumulative effects (this is for combining two or more activities). The restriction must also be expected to last for a continuous period of at least 12 months.
Who is eligible for the Disability Tax Credit in Canada?
The Disability Tax Credit is available to a wide range of individuals with disabilities in Canada. This includes individuals of all ages, from children to seniors. To be eligible, you must meet the following criteria:
1. Severe and Prolonged Impairment: You must have a severe and prolonged impairment in physical or mental functions that restricts your ability to perform one or more basic activities of daily living. Often times while looking at the disability tax credit application form, it can read as if you must not be able to perform the activity in order to qualify for the credit. That’s not the case. You can qualify for the disability tax credit if you take a longer amount of time to perform the activity. If you’re able to combine two or more basic activities of daily living, then the threshold to qualify is lessened. For instance, consider an individual with arthritis impacting their ability to walk and dress themselves. Instead of needing three times longer than average to walk 100 meters to qualify for the DTC, they could qualify by taking twice as long to complete both the walk and dressing tasks compared to someone without impairment.
2. Duration of Disability: The impairment must be expected to last for a continuous period of at least 12 months and the ability to perform the activity of daily living must be restricted substantially all of the time (at least 90% of the time).
3. Certification by a Qualified Practitioner: Your disability must be certified by a qualified practitioner (Whose included as a qualified practitioner?), such as a medical doctor or specialist, who is authorized to make the determination
The benefits of qualifying for the Disability Tax Credit
Qualifying for the Disability Tax Credit can provide significant financial benefits for individuals with disabilities and their caregivers. Here are some key advantages of obtaining the DTC:
1. Tax Savings: The DTC can help reduce the amount of income tax you pay moving forward. You may be eligible for additional benefits, such as the Disability Supplement to the Canada Workers Benefit, the Canada Caregiver Credit, the Child Disability Benefit, and the Registered Disability Savings Plan (RDSP), among others.
2. Retroactive Claims: If you were eligible for the DTC in previous years but didn’t claim it, you may be able to request a reassessment and receive retroactive tax refunds for up to 10 years. This can result in a substantial disability tax credit refund of over $27,000 (not including the supplement for those 17 or under). Check out our calculator to see how much you might be eligible to receive.
3. Transferability: If you don’t have enough taxable income to fully utilize the DTC, you may be able to transfer the credit to a supporting family member, such as a spouse/common-law partner, parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew.
4. Registered Disability Savings Plan (RDSP): Qualifying for the DTC opens the door to other financial benefits, such as the RDSP, a long-term savings plan designed specifically for individuals with disabilities. Contributions to an RDSP are not tax-deductible, but the investment growth is tax-deferred, and you may be eligible for government grants and bonds. You can read more about the RDSP here.
Steps to apply for the Disability Tax Credit
Applying for the Disability Tax Credit involves a step-by-step process that requires careful attention to detail. Follow these steps to maximize your chances of a successful application:
1. Gather Documentation: Collect all relevant medical and supporting documentation and information about the impact of your disability on your daily life.
2. Complete Form T2201: Fill out Form. Ensure all sections are completed accurately and in detail. The CRA focuses on specific wording to determine if someone qualifies for the disability tax credit.
3. Obtain Certification: Have your disability certified by a qualified practitioner, such as a medical doctor or specialist, who is authorized to make the determination.
4. Submit your Application: Send your completed Form T2201 and supporting documentation to the CRA for review. Ensure all required sections are included and that the information is legible and accurate.
5. Follow-up and Reassessment: Keep track of your application and follow up with the CRA if necessary. If your application is approved, you will receive a Notice of Determination. If it is denied, you can request a reassessment or appeal the decision.
It’s essential to submit your application as soon as possible, as processing times may vary. The CRA will review your application and determine if you qualify for the Disability Tax Credit based on the information provided.
Common mistakes to avoid when applying for the Disability Tax Credit
When applying for the Disability Tax Credit, it’s important to avoid common mistakes that could lead to delays or a denial of your application. Here are some key pitfalls to watch out for:
1. Incomplete or Inaccurate Information: Ensure that all sections of Form T2201 are completed accurately and in detail. Provide clear and concise information about your disability and its impact on your daily life. Make sure you provide your medical practitioner with relevant information and examples that the CRA specifically looks for when getting them to complete your form.
2. Missing Supporting Documentation: Gather all relevant medical and supporting documentation to strengthen your application.
3. Lack of Certification: Have your disability certified by a qualified practitioner who is authorized to make the determination. Without proper certification, your application will be rejected.
4. Failure to Follow-up: Keep track of your application and follow up with the CRA if necessary. If additional information is requested, provide it promptly to avoid delays.
By avoiding these common mistakes, you can increase your chances of a successful application and maximize your tax savings.
The Role of medical practitioners in the Disability Tax Credit application process
Medical practitioners play a crucial role in the Disability Tax Credit application process. As authorized certifiers, they assess and certify disabilities, providing the necessary documentation to support your application. It’s important to choose a qualified practitioner who has a thorough understanding of the eligibility criteria and can accurately assess your disability.
When selecting a medical practitioner, consider the following factors:
1. Expertise: Look for a practitioner with experience and expertise in assessing disabilities similar to yours. They should have a good understanding of the eligibility criteria and be familiar with the information required for the application. They should also be familiar with the specific symptoms that you experience and it’s helpful to have a history with that medical practitioner so they’re familiar with the symptoms you experienced in the past.
2. Access and Availability: Consider the accessibility and availability of the practitioner. It’s important to find a practitioner who can see you promptly and provide the necessary documentation within the required timeframe. Some specialists will not complete the form.
3. Communication: Choose a practitioner who communicates well and takes the time to understand your disability and its impact on your daily life. They should be willing to answer any questions you may have and provide clear and detailed documentation.
Building a strong relationship with your medical practitioner can make the application process smoother and increase the likelihood of a successful application.
Other tax credits and benefits for individuals with disabilities in Canada
In addition to the Disability Tax Credit, there are several other tax credits and benefits available to individuals with disabilities in Canada. These include:
1. Registered Disability Savings Plan (RDSP): The RDSP is a long-term savings plan designed specifically for individuals with disabilities. Contributions to an RDSP are not tax-deductible, but the investment growth is tax-deferred, and you may be eligible for government grants and bonds.
2. Canada Child Benefit: The Canada Child Benefit provides tax-free monthly payments to eligible families to help with the cost of raising children. Families of children with disabilities may be eligible for additional benefits.
3. Canada Caregiver Credit: The Canada Caregiver Credit was designed to provide tax relief for individuals who provide care and support to dependents with certain medical conditions or disabilities. The credit consolidated and replaced three previous credits: the caregiver credit, the family caregiver tax credit, and the infirm dependent credit.
It’s important to explore all available tax credits and benefits to ensure you’re maximizing your financial resources and improving your overall financial well-being.
The Disability Tax Credit is a valuable credit that can help individuals with disabilities and their caregivers maximize their tax savings in Canada. By understanding the qualifications and application process, you can potentially save money on your taxes and improve your financial well-being. Remember to gather all relevant documentation, complete the necessary forms accurately, and seek the certification of a qualified practitioner. Avoid common mistakes, stay informed about other tax credits and benefits, and consider seeking professional advice to maximize your tax savings. With the Disability Tax Credit, you can unlock financial support and make a positive impact on your financial future.
Apply for a free eligibility consultation for the Disability Tax Credit in Canada
My husband has dementia and is living in a long term care facility.
Would I (his wife) be able to apply for the disability tax credit or is that tax credit only available if he was still living with me. I do have to pay for him to live there and still supply his toiletries and clothing.
Hi, thanks for your question. You can claim for your husband, even if he doesn’t reside with you. To be able to claim a family member’s credits when you do not reside with them, you would need to show the CRA that you have provided him with financial assistance towards food, shelter or clothing expenses. You mentioned that you pay for his accommodations, so that would qualify to transfer his credits to you.
One important consideration is that if he or someone on his behalf such as yourself is claiming expenses paid to a nursing home for full-time care on line 33099 (Medical expenses for self, spouse or common-law partner, and your dependant children under 18) or line 33199 (medical expenses for other dependants), no one can claim the disability tax credit amount on his behalf. You can claim a portion of the nursing home fees towards wages for his care (up to a limit), although you need to provide the CRA with a breakdown of fees charged by the nursing home, which show specific amounts charged that our related to attendant care, if you plan to claim both, a the disability tax credit and a portion of the nursing home/attendant care expenses.
If you have any further questions, do not hesitate to reach out at info@disabilitytaxservice.ca.