"As long as the world shall last there will be wrongs, and if no man objected
and no man rebelled, those wrongs would last forever
~Clarence Darrow

Monday, October 22, 2007

The Disability Tax Credit ... Tales from the Disability and Estate Planning Seminar

I sincerely hope everyone reading this knows (or at least thinks they know) about the Disability Tax Credit (DTC).

It gives a nice size tax credit to an individual with a "profound impairmant" resulting in them being "markedly restricted" in any of the basic activities of daily living. It can be used by the taxpayer (to offset their taxable income) OR transferred to another "supporting" relative, such as a spouse (or, in the case of a child under the age of 18 years, to a parent or guardian).

If you're not familiar with this tax credit, please contact Canada Revenue Agency and ask them about it. And do not be discouraged if you are told that it is very hard to qualify for or that based on what you have told them, it wouldn't apply. Maybe yes, maybe no... Ask them to send you a T2201 Form (a form which both the taxpayer and the disabled individual's physician must fill out) anyway or download it from the website. When the form comes, take it to the person's doctor (or specialist if available) and see what they think.

But here are a few additional points that even the 'knowing' may not realize:

  • even if the disabled person is living indepedently (ie. in a group home or other supported living situation), you may well still be able to claim the DTC. This will turn on a question of fact; namely whether or not the taxpayer is in a "supportive" relationship with the disabled individual. This can include such things as whether or not you buy them clothes occasionally, take them on trips with you or whether they come to spend a few days with you when they are ill.
  • when you do apply for the DTC, keep in mind that it can be back-dated, not just to the date of the individual's diagnosis but for up to 10 (ten) years. Think about it, many types of disabilities are life-long, from birth, even if they weren't diagnosed until much later.
  • If you are the parent or other supporting relative of a child with a disability under the age of 18 years and you're already claiming the DTC, check last year's Income Tax Return or pick up the phone and call CRTC and make sure that you are claiming not just the DTC but also the "child disability" portion of the credit. This will take the tax credit from roughly $6,000 to $10,000.
  • Did you know that a learning disability may be sufficient to qualify a person as eligible for the DTC? Although I had heard a few comments here and there on the subject, it was mostly news to me. And if you have one child with more severe physical or mental challenges for whom you are already claiming the DTC, it may not have even occurred to you to think about this for a second child with a learning disability (guilty as charged).

And don't forget, the DTC not only gives the taxpayer a good-sized (and much appreciated) tax credit, it also has a very positive effect on the monthly Child Tax Benefit (what we use to know as "Family Allowance") as a "child disability benefit supplement" will be added to the monthly cheque for each child who has been accepted for the DTC. Even if your family income disqualifies you from receiving the Child Tax Benefit, you can still qualify for the child disablity benefit supplement if you are claiming the DTC for the child. And any move from no monthly cheque to a monthly cheque has got to be a good thing!

If you have not applied for the Child Tax Benefit for your child, but have already filed Form T2201, complete and mail Form RC66, Canada Child Benefits Application, to your tax centre. The CRA will determine whether or not you are eligible for the Child Tax Benefit and the Chid Disability Benefit supplement.

This child disability benefit supplement came into effect in 2003, meaning that if you get your child accepted for the DTC now or in the future, there should be a lovely retroactive effect to your Child Tax Benefit.

As a general note, I would suggest you check out this page to see what else persons with disabilities can claim as a deduction or a credit. You should also check out the Medical and Disability - Related Information - 2006 Guide.

**With grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Society for 'bringing him to town'.

Update: And remember that any legal fees you incur as a result of qualifying yourself or you dependant for the DTC are generally tax-deductible. Which means that if you find yourself running into difficulty with the CRA, hiring a lawyer to do the job may not be such a bad idea.

Update II: For more info on this subject, search the labels appearing at the bottom of this post.


Anonymous said...

Many canadians are unaware that the canadian government offers tax benefits and grants for anyone who has a physical or mental disability. Unfortunately collecting these benefits can be complicated and stressful. At the Canadian Disability Corporation they simplify the process to make sure you obtain every dollar possible from the CRA. On top of this, they will also ensure you’re applied to other programs available to people with disabilities such as the Registered Disability Savings Plan (RDSP).

Anonymous said...

thank you so much for this well guided help. I will be looking into all this and reapply Thanks again Lillian and son

MMC said...

Glad it was useful to you, Lillian. And good luck!

By the way, as a side note, once an individual is successful in obtaining the Disabiltiy Tax Credit, the door is then open for a RDSP to be opened on that person's behalf. For anyone not familiar with the RDSP, click on the Disability Savings Plans label (here or on the bottom right hand side of the page). It's well worth the extra reading!

Aster Bin said...

I am always a slow learner when it comes to topic like tax and credit and honestly I had no idea regarding this information before reading this post. Thank you so much for sharing this post with us.
Personal Tax Brampton