Disability Tax Credit

In my experience, when I have asked parents of children with cognitive and developmental disabilities (which clearly qualified them for the disability tax credit) if they had applied for the credits, 45% answered “no” or “unsure” to this question! The realm of tax credits is one huge area that is often overlooked in terms of helping clients lower their payable income tax, as discussed below in greater detail. In addition to lowering taxes, qualifying for tax credits can also be a requirement for applying for other money-saving vehicles such as the Registered Disability Savings Plan. 

To qualify, a person must have a severe and prolonged impairment (expected to last at least 12 months).

The filing process can be onerous, because it requires the involvement of a medical professional and there is sometimes disconnect between how physicians complete forms and how the CRA civil servants process applications at the various centres across the country. For this reason I offer this service of back filing for the Disability tax credit.

Below are the most common questions I hear about the credit.

What is the disability amount?

The disability amount is an non-refundable tax credit that reduces the amount of income tax people with disabilities, or people supporting them, may have to pay.

Who can claim the disability amount?

If you qualify, you, as a person with a disability, can claim the disability amount on your return. Your spouse or another supporting person may be able to claim the part of the amount that you do not need to use to reduce your federal income tax to zero.

If you or anyone else paid for an attendant or for care in a nursing home or other institution because of your impairment, it may be more beneficial to claim the amounts paid as medical expenses instead of the disability amount. In some circumstances, both amounts may be claimed.

Claiming the disability amount for yourself.

You should use Form T2201, Disability Tax Credit Certificate, to claim the disability amount. If you were allowed the disability amount last year, and you still meet the eligibility requirements this year, you can claim the amount this year without sending another Form T2201.

Transferring the unused part of the disability amount.

You, as a person with disabilities, may not need all of the disability amount to reduce your federal income tax to zero. In that case, your spouse or supporting person may be able to claim the unused part of the amount.

Generally, a supporting person has to be related to the person with disabilities by blood, marriage, or adoption. For this purpose, you will be considered to be a supporting person related to a person with disabilities if that person is any of the following:

1. •Completely dependent on you for support now, and you have custody and control of the person with disabilities or did have custody and control of the person immediately before that person turned 19 years of age.
   

2. •Your natural or adopted child
   

3. •Your spouse's child
   

4. •Your child's spouse
   

More than one supporting person may make a claim for the same dependant. However, the total amount claimed by all supporting persons for that dependant cannot be more than the unused part of the amount.

Benefits of Being Approved for the Disability Tax Credit

Not only will you receive the initial lump sum of money for retroactively filing for the Disability Tax Credit (DTC) but you will also be able to claim an additional amount in excess of $1,600, every following year. Qualifying for the disability tax credit is not only about the disability amount you can claim either. Qualifying for the disability tax credit opens up a variety of benefits that many people are unaware of, such as:

Caregiver Tax Credit

Line 315, the caregiver amount, comes into effect when there is a person, older that 18 years of age, who resides with you at some point during the year,and is dependant on you, due to mental or physical infirmity.   The dependant needs to have income of less than $14,000.00 per year for you to receive the maximun tax credit.  As well, the person must be your child or grandchild or you or your spouse or your common-law partner’s brother, sister, niece, nephew, aunt, uncle, parent, or grandparent.

If the person was with you any time during the year, you are eligible for the amount. The eligibility for the caregiver amount is effected by the dependant’s net income and conflicts with the use of line 306. Only one of these lines can be used and in most family situations , line 306 gives no real benefit. If a child over 18 receives Ontario Disability Support Program payments or a senior gets the Guaranteed Income Supplement, the persons modest income will not erode the tax credit used by the caregiver, but the same modest income will completely erode the line 306 tax credit.

You Can Claim for 10 Previous Years

What the booklet does not tell you is that, if you failed to apply for the caregiver amount, you may backfile, going back as far as  10 prior years, presuming the person with disabilities was over 18 for all of those years. With the taxation system as complicated as it is, it is good to know that you have another kick at the can. It doesn’t have to be Tax time....any time is the time to revise past omissions or errors. Using line 315 should put about $600 a year in your pocket.

For more information, read Ken’s Blog on this subject

Additional Supplements for Eligible Minors

If you have child under 18, who is qualified for the Disability Tax Credit, then depending on your family net income* you can expect a sizeable increase in your Canada Child Tax Benefit ("CCTB") because of the Child Disability Benefit. For those who qualify, it's a tax free benefit of up to $2,455 a year ($204.58 a month).

Canada Revenue Agency's  information on  the Child Disability Benefit (CDB:

http://www.cra-arc.gc.ca/bnfts/dsblty-eng.html

Registered Disability Savings Plan (RDSP)

Being approved for the DTC also allows an individual the ability to setup a Registered Disability Savings Plan (RDSP). This RDSP is a great investment tool for people with disabilities for a number of reasons. Depending on your net family income the government is willing to match contributions made to the plan.

For more information please read Ken’s article he co wrote with Peter Merrick on the subject.

Canada Revenue Agency's RDSP website:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rdsp-reei/menu-eng.html

Canada Revenue Agency's information on the Child Disability Benefit (CDB)
http://www.cra-arc.gc.ca/bnfts/dsblty-eng.html

Frequently Asked Questions About The Tax Recovery Process.

Will I be eligible?
No disability automatically qualifies or disqualifies an individual for these credits. Every individual must be assessed on a case-by-case basis. Many people are eligible for these credits, yet a majority of individuals who could qualify, are not. This is for a variety of reasons, such as people believing misconceptions they have heard.

How long will the process take?
The entire process usually takes two to three months.

Can't I do this on my own, why do I need your help?
You can certainly file for any tax credit or supplement on your own. What we often find is that small mistakes can lead to someone becoming ineligible or not making full use of the tax credits which results in a smaller return. Making a mistake and having to make appeal and resubmit the information can result in an additional three month wait. Let's face it, who wants to deal with the Canada Revenue Agency (CRA)? The answer is, we do. Let us deal with the CRA and leave you with the knowledge that there is a trained professional on your side. Rest assured knowing that it has been done correctly from the very beginning.

What amount of money can I expect to receive?
The amount of money you can expect to receive depends on a number of factors. Many of our clients can expect to receive anywhere from $2,200 to $30,000.

Where is the money coming from?
The money comes from the Government of Canada because they understand that having a disability or caring for someone with a disability results in extra financial requirements. The amount of money may seem large, however the cost of caring for someone with special needs is often much more.

Can I file on behalf of a family member?
Yes, of course you can.

I do not live with my dependent or supportive relative; can I still claim these credits?
Yes you can, although it depends on the kind of support you provide.

My parent or grandparent has since passed on, but I believe they may have qualified. Is there anything I can do?
Yes, you can go back ten years. One word of caution, each year that goes by you will lose out on thousands of dollars.

I have a disabled child, who's a minor. Does that make a difference?
It certainly does. It likely means you're entitled to a large increase with your return as there are extra supplements that are provided for minors. Additionally, you can expect your Canada Child Tax Benefit ("CCTB") to increase quite a bit also.

I do not have a taxable income. Can I still claim these credits?
There are a number of benefits you may be entitled to, even if you do not have a taxable income. Further, many of the credits are available to transfer to your relatives, even if you do not live with them.

click here to ask Ken a question