How Does the Disability Tax Credit Work?
The disability tax credit is a valuable benefit offered to Canadians. Even though the Canadian tax system can often be confusing, it’s worth taking the time to understand the ins and outs of this credit, either for your own benefit or for the benefit of your family. I’ve seen this credit benefit a number of my clients.
I’ll answer all of your questions about how the disability tax credit works: from applying for the credit, to who can claim the credit, to receiving a benefit for previous years.
What is the disability tax credit?
The disability tax credit is offered to Canadians to help offset the costs that come with having a disability. The credit works by reducing the amount of tax you would pay on your personal tax return. If you don’t pay any tax, you won’t receive any benefit from this credit. However, you might be able to transfer it to someone else (discussed below).
The disability tax credit is separate from disability benefits that you could receive. Qualifying for one doesn’t mean that you will automatically qualify for the other.
Also, you can only receive one credit. It can’t be multiplied if you have more than one disability.
Who qualifies for the disability tax credit?
If you have a severe impairment in physical or mental function that is expected to last longer than 12 months, I recommend that you ask your medical practitioner to review the disability tax credit application with you. You can find the form here.
You must have a disability tax credit certificate completed by your medical practitioner. They will need to certify that you have a “severe and prolonged impairment”. Your medical practitioner completes and signs the form, you’ll need to send it to the Canada Revenue Agency for processing. You can mail in the form to this address.
In order to meet the criteria you must have one of the following impairments:
- Marked restriction in at least one of the basic activities of daily living. This could include speaking, hearing, walking, bladder or bowel function, feeding, dressing, mental functions necessary for everyday life
- Significant restriction in at least two or more of the basic activities of daily living
- Require life-sustaining therapy that is needed to support a vital function. This therapy must be required at least 3 times per week, for an average of 14 hours per week to qualify. Life sustaining therapies can include treatments like dialysis and insulin therapy
- These impairments must be prolonged. That means the impairment is expected to last for 12 months or longer. It must be present all or substantially all of the time.
Who can claim the disability tax credit?
You will be able to claim the credit once your application has been approved by the Canada Revenue Agency. If your spouse or dependent is approved for the credit, you may be able to claim their credit on your tax return. However, you can only claim the credit on one person’s tax return. For example, if your spouse is approved to claim the credit, you may be able to claim their credit on your tax return. They cannot claim the credit themselves. If you and your spouse are both approved to claim the credit, you can each claim the credit.
How much disability tax credit can I get for 2019?
The disability tax credit works to reduce the amount of tax you pay by applying a percentage of the credit against your tax payable, rather than a dollar-for-dollar reduction in tax. The amount of the 2019 disability tax credit is $8,416. Generally, you can expect a $2,100 reduction in your 2019 tax payable if you live in Alberta.
How do I claim the disability tax credit?
Print off form T2201 “Disability Tax Credit Certificate”. You can find the form here. You will need to fill out Part A of the form. If you are a legal representative for a person with a disability, you can fill out Part A on their behalf.
Have your medical practitioner fill out Part B of the form to certify if you meet the criteria to claim the disability tax credit. Keep in mind that medical practitioners often charge a fee to fill out the form. The fee is not usually covered by provincial health care plans.
The form is broken down into sections based on type of disability. A doctor or a nurse practitioner will be able to fill out all sections of the form. In some cases, a medical practitioner can fill out the section of the form relating only to their area of specialty. For example, an optometrist can fill out the section on vision and a speech language pathologist can fill out the section on speaking.
Once the form is complete, you can mail the form to your tax centre (addresses are here), you can submit it through My Account or have your accountant submit it through Represent a Client. CRA will notify you by mail once they have reviewed and approved your application. You don’t need to send in the form each year unless the Canada Revenue Agency asks for it.
The Canada Revenue Agency will allow you to amend tax returns from previous years if you were eligible for the disability tax credit in previous years but didn’t claim it. You can request adjustments for up to 10 years in the past.
What do I do if my DTC application is denied?
If your disability tax credit application is denied, you may request a review of your application and you may send in new medical information that could change your application. This request must be made in writing to your tax centre. You can find the addresses here.
Yo may also file a formal objection within 90 days of receiving notice that the Canada Revenue Agency has denied your application. You can find information on filing objections here.
I hope this is a useful guide in your application for the disability tax credit. If you have any tax questions please contact me.