The Disability Tax Credit (DTC) in Canada recognizes the challenges associated with having or caring for someone with a disability. The number of Canadians living with a disability (physical, sensory, cognitive, or mental) is significant.
In 2020, there were 1,380,180 unique eligible people with DTC certificates.
This fact deserves special attention. To qualify for a DTC, the condition has to block the person from basic activity of daily living (BADL). That is why the federal government wants to ease the tax burden of people who have or who care for people with disabilities.
Disability Statistics in Canada
Some notable facts from a 2017 Statistics Canada report about Canadians with disabilities include:
- One in five Canadians has one or more disabilities.
- Women are more likely to have a disability than men.
- The most common types of disabilities related to pain, flexibility, mobility, and mental health.
- Mental health disabilities were the most common among those aged 15 to 24 years (8%).
- Those aged 25 to 64 who have a disability were less likely to be employed (59%) than those with a disability (80%).
- Those with severe disabilities (28%) aged 25 to 64 years were more likely to be living in poverty than those without disabilities (10%) or only with mild disabilities (14%).
Many have unmet needs for disability aids, devices, and medication, as they are unable to pay for them:
- Among persons with disabilities ages 15 years and over, 1.5 million had an unmet need for disability aids or devices. One million of these could not afford to pay for their unmet need, representing 69% of those with unmet needs or 17% of all persons with disabilities.
- About 13% of all persons with disabilities aged 15 years and over had unmet medication needs due to cost.
- Overall, 26% of persons with disabilities had an unmet need (disability aid, device, or medication) due to cost, which represents over 1.6 million adults.
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What is The Disability Tax Credit?
The disability tax credit (DTC) is a federal non-refundable tax credit that persons with disabilities or their caregivers can claim to reduce their income taxes. The individual with the disability can use the credit or transfer it to their spouse or supporting family member.
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Types of Disabilities Eligible For The Disability Tax Credit
Three categories of disabilities may qualify you for the DTC:
- You’re blind – You must show that your vision can’t be improved with the use of corrective lenses or medication and that it restricts your ability to do one or more tasks associated with daily living. Your vision must meet at least one of the following criteria:
- The visual acuity in both eyes is 20/200 or less.
- The greatest diameter of the field of vision in both eyes is 20 degrees or less.
- You’re receiving life-sustaining therapy – you must dedicate a significant portion of your time to therapy, resulting in time away from everyday activities. To be eligible under this category, you must meet both of the following criteria:
- The therapy is needed for a vital function.
- The therapy is needed at least 3 times per week, for an average of 14 hours per week.
- Your disability restricts you from performing basic activities – You’re unable to perform or have great difficulty performing one or more of the following activities at least 90% of the time, even with the aid of medication, therapy, or devices:
- Eliminating (bowel or bladder functions)
- Mental functioning necessary for everyday life.
Your impairment must have lasted a year or is expected to last a year in order to qualify in the above categories.
How Much Is the Disability Tax Credit?
For 2022, the federal DTC for an someone 18 years and older is $8,870. The DTC for 17 and under is $14,044. That is because there is a children’s supplement of $5,174. The calculation is:
$8,870 (regular benefit) + $5,174 (children’s supplement) = $14,044 (total benefit).
To determine the benefit’s actual dollar amount, multiply this amount by the federal and provincial tax rates that correspond to your tax bracket.
For example, if you live in Alberta and earn $45,000 a year, the DTC’s dollar amount could be worth as much as $2,104 (15% federal and 10% provincial). Also, if the person with the disability is under 18 years old, they can qualify for the extra supplement worth up to $5,174.
You aren’t limited to utilizing the DTC in the current tax year only – it can be carried back up to 10 years, which may result in substantial tax refunds. To have the credit backdated to prior tax returns, you must file a T1-ADJT1 form for each tax year that you’d like to claim the benefit for (provided you qualify). Another option to backdate the credit is to fill out Section 3 of Form T2201.
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How do You Apply For The Disability Tax Credit?
The DTC’s application process has a reputation for being complicated and drawn-out, so much so that few people are willing to apply for it. However, if you exercise patience, use sound judgement, and obtain advice when needed, the process will be a lot smoother. You can apply for the DTC by yourself or with the help of an expert.
If you possess all the information required to apply for the DTC, you can complete the application yourself.
To begin, you need to submit form T2201. You will need to fill out your personal details in Part A and then have your doctor fill out the necessary information in Part B. Your doctor must certify that you have a severe and prolonged ailment that interferes with your ability to perform everyday functions.
Keep In Mind The Following:
- The CRA must approve your application before you file your tax return.
- The CRA may grant you approval to use the DTC indefinitely or only for a specific time.
- Attach all relevant supporting documents. You can help expedite the approval process by providing as much evidence as possible that you meet the eligibility requirements for the DTC.
With a Disability Tax Credit Consultant
As mentioned, getting approved for the DTC isn’t an easy task. If you’re not confident with navigating the approval process on your own, consider seeking the help of a DTC consultant to guide you. These experts specialize in aiding people with qualifying ailments to obtain the DTC.
There are many reasons why hiring a DTC consultant is a good option:
- The application is long, confusing, and detailed. A consultant can provide advice and help you understand the process.
- Application errors can lead to rejection or a lower tax credit amount. Many medical professionals themselves don’t understand the rules and may assume you don’t qualify, when in fact, you do. A consultant will know the rules regulations surrounding the DTC very well.
- DTC consultants can ensure you get the maximum amount you’re entitled to under your circumstances.
Disability Tax Credit: Our Final Thoughts
Don’t let a complicated process stop you from applying for the DTC. The DTC is a helpful financial tool if you have a severe disability, or if you’re supporting someone who is. Instead of getting into debt because you need loans to care for yourself or someone with a disability, use the DTC tax break. The credit provides you with much needed financial relief, making each day a little bit less stressful and challenging.