Tax Credits

The Disability Amount (Disability Tax Credit)

Perhaps one of the most valuable tax credit available to people with disabilities and their families is the Disability Amount. This credit is most often called the Disability Tax Credit (DTC). It is a non-refundable tax credit which can reduce the amount of tax that a person with a disability has to pay. If the DTC is not required by the person with a disability to reduce their taxable income to zero, then it may be transferred in whole or in part to a family member who supplied some or all of the basic necessities of life such as food, shelter and clothing to the person. Even if the person with the disability is not living with you, you may still be able to claim the DTC if the person depends on you for regular and consistent support for one or more of the basic necessities of life such as food, shelter or clothing. You may be asked to provide receipts or other documents to support this claim.

In the 2018 Taxation Year, the Disability Amount for a person who was 18 years of age or older is $8.235.00. If the person with the disability was under age 18 then there is also a Disability Tax Credit Supplement of $4,804.00 that is added to the disability amount. Both of these amounts can be transferred to a supporting family member if necessary. It should be noted that the supplement can be reduced in 2018 if someone claimed Child Care Expenses or Attendant Care expenses as a Medical Expense. Details of the Disability Amount can be found on Canada Revenue Agency’s web site by following the link at:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/316-eng.html

b) The Canada Caregiver Credit (CCC)

The Canada Caregiver Credit is designed to provide tax relief to caregivers of dependants who have an infirmity and who are dependant on the caregiver for support because of that infirmity. It replaces the former Caregiver Credit, Infirm Dependant Credit and the Family Caregiver Credit all of which ended in the 2016 tax year.

The amount that can be claimed depends on the circumstances:

An amount of $6986.00 can be claimed for an infirm spouse or common-law partner or an infirm dependant 18 or over but is reduced by any amounts claimed for the Spousal Amount (Line 303) or the Equivalent to Spouse amount (Line 305). In this circumstance, the amount is claimed on line 304 of the caregiver’s return.

An amount of $6986.00 can be claimed for infirm dependants who are parents, grandparents, siblings, aunts, uncles, nieces, nephews or adult children (age 18 or over) of the claimant or claimant’s spouse or common-law partner. In this circumstance, the amount is claimed on line 307 of the caregiver’s return.

An amount of $2182.00 can be claimed for an infirm dependant spouse or common-law partner for whom the claimant claims the Spousal Amount (Line 303) or Equivalent to Spouse amount (Line 305).
An amount of $2182.00 can be claimed for an infirm child who is under 18 years of age at the end of the taxation year. This amount is claimed on line 367 of the return.

It should be noted that the dependant person no longer has to live with the caregiver but must be dependant upon the caregiver. Also, the Canada Caregiver Credit may be reduced when the dependant’s income is greater that a stated amount.

c) T2201 Disability Tax Credit Certificate

In order to qualify for the Disability Tax Credit, information relating to the disability must be reviewed by Canada Revenue Agency. This information is collected on form T2201, “Disability Tax Credit Certificate” which is submitted to CRA. The T2201 form can be obtained on line at
http://www.cra-arc.gc.ca/E/pbg/tf/t2201/

An interesting feature of the T2201 form is found in Section 3. When you are applying for the DTC for yourself or for your dependent child with a disability under age 18, you can tick the box on the form and have CRA adjust your tax returns for prior years. There is no longer any need to send a letter to CRA to have this done. However, in other circumstances you will still have to send the T1-ADJ or a letter requesting an adjustment of prior years’ returns. Generally, we recommend that a letter be used since this simplifies the process and so the procedure with the T1-ADJ is not being shared in this year’s Tax Tips document. Those circumstances in which a letter to CRA is still required are:

The dependant is 18 years of age or older
You are claiming for your spouse or common law partner
The Disability Amount is being divided between 2 or more supporting persons
Other changes not mentioned above

If a person needs assistance in filling out the form and if they wish to appoint another individual or organization as their Representative for income tax matters, they must complete CRA’s form T1013, “Authorizing or Cancelling a Representative”. This form can be found on the web at http://www.cra-arc.gc.ca/E/pbg/tf/t1013/ The completed form will allow the named representative to have access to your records with CRA and to act on your behalf with respect to issues surrounding your tax matters.
A person may be eligible for the disability amount if a qualified practitioner certifies on Form T2201 Disability Tax Credit Certificate, that you have a prolonged impairment, and that the effects of the impairment are such that one of the following applies:

You are blind, even with the use of corrective lenses or medication.
You are markedly restricted in any one of the following basic activities of daily living:

speaking;
hearing;
walking;
elimination (bowel or bladder functions);
feeding;
dressing; or
performing the mental functions necessary for everyday life.

Life-sustaining Therapy – You need therapy to support a vital function, and you need this therapy at least 3 times per week for an average of at least 14 hours per week. It may be appropriate for you to track the time you take each week to prove to CRA that you are in fact spending more than 14 hours per week.

Cumulative Effect of Significant Restrictions – if you do not quite meet the criteria for being blind or markedly restricted, but the following conditions apply:

because of your impairment, you are significantly restricted in two or more basic activities of daily living, or you are significantly restricted in vision and at least one of the basic activities of daily living, even with appropriate therapy, medication, and devices;
these significant restrictions exist together, all or substantially all the time (at least 90% of the time); and
the cumulative effect of these significant restrictions is equivalent to being markedly restricted in a single basic activity of daily living.

The key to a successful application for the DTC is to fully describe the impact that the condition has on the person with the disability. To merely name the condition is not sufficient. You must be very specific as to how the condition affects the person. Your doctor will complete the form with his or her impression of the impact the disability has in the various categories. The doctor should also complete the full details of the effects of the impairment on the last page of the form. The more information provided the easier it will be to approve the application. It is also important to stress to the doctor that the “onset of impairment” date be listed as the very first date upon which the impairment began. This is important when any back-filing actions are undertaken. If you have been approved for a period of time for which you have not claimed the credit, you may re-file for those years and receive a refund of taxes.

Once the form is completed, you should sign it, and forward it to Canada Revenue Agency. These forms can be reviewed at any time of the year so you needn’t wait until tax time for submission. In fact, it often takes several months for Canada Revenue Agency to approve the form and so it would be prudent to send it in as soon as it has been completed.

Measures Requiring the Disability Tax Credit:

It should also be noted that approval for the Disability Tax Credit has a significant impact on several tax measures. It is a pre-requisite for the following:

Registered Disability Savings Plan (RDSP): The RDSP is a savings plan from the Federal Government which is designed to allow people with disabilities and their families to save for the future. It involves contributions of money from private sources plus generous matching provisions from the Federal Government. A pre-requisite for creating and the continuation of the RDSP is qualification for the Disability Tax Credit. More information relating to the benefits of this program can be found at:

http://www.specialneedsplanning.ca/rdsp.html

Qualified Disability Trust (QDT): Qualified Disability Trusts are trusts that are created in a will and which have a beneficiary who qualifies for the Disability Tax Credit. These trusts receive preferential tax treatment on income earned and retained in them. Henson Trusts are often deemed to be QDT’s an so having a beneficiary qualify for the Disability Tax Credit can permit preferential tax treatment. More information regarding Henson Trusts that are deemed to be Qualified Disability Trusts can be found at:

http://www.specialneedsplanning.ca/henson.html

Home Buyer’s Plan: A person who qualifies for the Disability Tax Credit or a blood relative can withdraw up to $25,000 from their RRSP to purchase a home and it doesn’t have to be a new property nor the first property. The home need only be more accessible or in an environment that is better suited to his personal needs.

Home Buyer’s Amount: A person who qualifies for the Disability Tax Credit may be able to claim $5,000 for buying a qualified home. It does not have to be a first home but the purchase must be to allow the person with the disability to live in a home that is more accessible or better suited for their needs.

Home Accessibility Expenses: This is a non-refundable tax credit that allows that if you are age 65 or older or if you qualify for the DTC, you may be able to claim up to $10,000 per year in expenses that were incurred to allow the person to gain access to the home or to be mobile or functional within the home or incurred to reduce the risk of harm within the home or in accessing the home.

Registered Education Savings Plan: When the beneficiary of a single RESP qualifies for the Disability Tax Credit, the maximum lifespan of the plan is extended from 35 to 40 years. In addition, the maximum contribution period is extended from 31 years to 35 years.

Therefore, even if a person cannot use the Disability Tax Credit (due to income levels) there is still significant benefit in obtaining it.