According to a 2017 Statistics Canada report, one in five Canadians have one or more disabilities. Many of these people struggle with chronic pain, limited mobility, and mental health. They have difficulty maintaining employment, need supervised care, and face many financial challenges that push them into poverty.
To help alleviate some of the financial challenges persons with disabilities face, the Canadian government has instituted the disability tax credit.
What is a Disability Tax Credit?
The disability tax credit (DTC) is a federal non-refundable tax credit that can be utilized by persons with disabilities to reduce their tax burden. The credit allows the taxpayer to obtain a refund upon completion of their tax return, which can be used to pay for the additional expenses required to care for a person with a disability.
Your disability must fall into one of these categories to qualify for the DTC:
- You’re blind
- You’re receiving life-sustaining therapy
- Your disability restricts you from performing basic activities, such as speaking, walking, hearing, feeding, dressing, etc.
You must provide proof that your impairment is chronic, having lasted at least a year, or the expectation is that it will last at least a year.
Learn more on how to qualify for the disability tax credit.
How much can you get?
For 2020, the federal tax credit is $8,576. The DTC’s actual dollar amount is calculated by multiplying the $8,576 amount by the tax brackets your income corresponds to at the federal and provincial levels. For example, if you live in Ontario and earn $40,000 a year, the dollar amount of the credit would be worth $2,401 (15% federal and 13% provincial). Also, a supplemental credit amount worth up to $5,003 available to taxpayers under 18 years of age.
The DTC can provide a sizable amount of financial relief to those living with a disability: it can be carried back up to 10 years, resulting in tax refunds worth tens of thousands of dollars.
Despite the enormous financial benefits offered by the DTC, relatively few Canadians are aware of it. One common cause of this lack of familiarity is the complicated application process and painfully slow approval process. To ensure the highest possible chance of gaining approval for the DTC, some applicants have sought help from disability tax credit consultants.
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What is a Disability Tax Credit Consultant?
The application process for the DTC is complex, lengthy, and frustrating. Overlooking even one crucial detail can be the difference between approval and rejection. It can take months or even years to obtain permission for the credit. Even seasoned doctors and accountants have difficulty helping individuals complete the forms correctly – the doctors are not well-acquainted with the DTC application’s tax aspects while accountants are not well versed in the medical aspects. For these reasons, many people don’t bother with applying in the first place, thus losing out on the significant financial benefits provided by the DTC.
Disability tax credit consultants are experts who specialize in guiding individuals through the DTC application process, ensuring each required piece of information is presented and submitted correctly. They have the knowledge and experience to maximize a person’s chances of receiving approval.
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How do Disability Tax Credit Consultants Work?
A disability tax credit consultant can help you in several ways:
- Guide you on filling out form T2201 – T2201 is the form you must complete and submit to the government to secure approval for the DTC. It contains two sections: Part A and Part B. In Part A, you’ll fill out your personal details. Part B is filled out by your doctor, who must verify that you have a disability that meets the DTC eligibility criteria. Your doctor may not believe your claim is viable when, in fact, it is. A DTC consultant can communicate with your doctor and explain your eligibility. In cases where you don’t have a qualified physician to certify your disability, the DTC consultant can refer you to one who can review your file and provide the necessary assessment.
- Increase your odds of approval – A DTC consultant understands the nuances of the DTC application process and can significantly increase your chances of getting approved – and in a timely manner.
- Ensure you get the right amount – You want to ensure you get the maximum DTC amount you’re entitled to. A DTC consultant can determine the correct amount you’re eligible to receive, not only for the current tax year but prior tax years as well.
- Provide valuable advice – A DTC consultant will aid you along the entire DTC application process, clarifying sections of the form you may have difficulty understanding. There’s nothing worse than having your application rejected because you misinterpreted a few words in a single question. The consultant will ensure the details you provide satisfy the eligibility requirements.
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Cost of Disability Tax Credit Consultants
Like any other service, helping individuals prepare their DTC application comes with a price. If you hire a DTC consultant, expect the pay the following:
- A flat fee for determining eligibility and completing form T2201.
- A contingency fee. This fee is calculating as a percentage of the total refund received and typically varied between 15% and 40%. No contingency fee is charged if the application is unsuccessful.
An approved applicant can easily pay thousands of dollars in contingency fees to a DTC consultant, greatly reducing the amount they have leftover. The CRA estimates that in 2019, DTC consultants collected between $9.5 million and $25.4 million in contingency fees. Not surprisingly, there has been an outcry in recent years from those who believe DTC consultants charge excessive rates. They support a cap on fees as a remedy to the problem.
In response, the federal government has proposed a series of upcoming rules to rein in the rates charged by DTC consultants. These rules are part of the Disability Tax Credit Promoters Restrictions Act (DTCPRA).
Most notably, the DTCPRA mandates a flat rate on contingency fees instead of a percentage based on the refund amount. The flat fees are:
- $100 charge for determination of eligibility of the DTC and helping to complete Form T2201.
- $100 for a DTC-related claim made on an individual’s income tax return. Plus, $100 for each year the DTC is retroactive (up to nine taxation years are allowed).
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The above fees are the maximum a DTC consultant can charge for assisting individuals with their application. The capped fees don’t apply to a DTC consultant’s work helping an individual appeal a rejected application. Also,
The fee limits don’t affect medical professionals who aid applicants by completing Part B of form T2201. Provincial regulations and medical associations govern the fees they charge.
The DTCPRA also provides details on penalties levied on DTC consultants who charge more than the fees outlined in the regulations. These penalties can range from $1,000 to $25,000. Consultants are required to reimburse clients they overcharge.
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Should You Hire a Disability Consultant?
If you aren’t confident about completing the application on your own but feel that you would strongly benefit from the DTC, you should consider hiring a qualified DTC consultant. Until the fee limits under DTCPRA come into effect, be sure to thoroughly examine each consultant’s experience, knowledge, and most importantly, the fees they charge.