Disability tax credit

Making the most of the federal government's disability tax credit.

If you or someone in your family has a disability, you already know what a profound impact it can have on your quality of life and your finances.

Family support is always vital, of course, and there are programs and organizations that can also provide help and support, but anything that can be done to reduce the additional financial costs of a disability is always welcome. The federal government provides tax relief for those with certain types of physical or mental impairments through the non-refundable Disability Amount Tax Credit (DTC).

The tax relief can be significant and ongoing but many people don’t even know they qualify for the DTC, or that if they have missed claiming it in the past, they may be able to seek adjustments and reclaim those missed opportunities. Here is some basic info to be sure the DTC will work for you.

To be eligible for the DTC you must complete Canada Revenue Agency (CRA) form T2201.

A qualified person – usually your doctor – must certify that you have a severe and prolonged mental or physical impairment that markedly restricts the ability to perform the basic activities of daily living. If you are receiving extensive, life-sustaining therapy, you may also be eligible for the DTC, under certain conditions.

Once approved, you may claim the disability amount on your income tax return.

If all or part of the disability amount is not claimed by the taxpayer with the disability (who is also a dependent), it can be transferred to a spouse or common-law partner or another supporting taxpayer, who may also be able to claim the Caregiver Amount Tax Credit.

The DTC can also be a qualifier for obtaining other tax breaks, such as for certain medical expenses.

If you have missed claiming the DTC in past years, you can seek adjustments to your previous returns for up to ten years through the CRA’s Fairness Policy. If you want the CRA to reassess a tax year and allow a claim for the DTC, you must either submit CRA Form T1ADJ or send a letter of request, with details, to the CRA. You must also obtain the support of a medical practitioner who certifies that the impairment existed during the previous tax years.

It can be very complex to get the most from the DTC, especially when it comes to the interrelationships with other financial provisions for a disabled person. That’s why a discussion of the issues with your professional advisor is always a good idea.

Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.