Disability Tax Credit

The Disability Tax Credit (DTC) is a non-refundable tax credit in Canada for individuals who have a severe and prolonged impairment in physical or mental function. It qualifies as prolonged if it is expected to or has lasted at least 12 months. The DTC is required in order to qualify for the Registered Disability Savings Plan. Families using a Henson trust, the Canada Disability Child Benefit other estate planning methods for children with Disabilities are not excluded from the DTC and should consider whether they qualify.

Eligibility

The individual must be "markedly restricted" in at least one of the following categories: speaking, hearing, walking, elimination (bowel or bladder functions), feeding, dressing, performing the mental functions of everyday life, life-sustaining therapy to support vital function and the recently introduced cumulative effects of significant restrictions. The degree of disability must be approved by Canada Revenue Agency before it can be used, and this process requires the completion and submission of a form. The T2201 Disability Tax Credit Certificate form must be completed by a qualified professional related to the impairment such as a medical doctor, physiotherapist, occupational therapist, psychologist, audiologist, or optometrist, in order to qualify as having a severe and prolonged impairment. The practitioner must certify on the T2201 form that the impairment meets specific conditions within the set category. The conditions vary depending on impairment.

A document released by the Canadian Psychological Association (CPA) in response to suggestions they made to the House of Commons Sub-Committee on the Status of Persons with Disabilities, attempts to assist medical professionals with deciphering what qualifies as being markedly restricted in the "mental functions necessary for everyday life".

In 2005, the CRA introduced a new category of eligibility, "cumulative effect of significant restrictions". This category is useful for individuals who are disabled but not restricted enough to qualify as being markedly restricted. Since this was introduced in 2005,an applicant may only be able to recapture funds since that point.

Benefits

An applicant can file for the disability amount, back 10 years, due to the Tax Payer Relief Provisions in the Income Tax Act. The DTC amounts to C$7,687 (According to line 316) in tax savings, and if filed for the full 10 year period the possible tax savings are excess of 30,000.

The DTC can be found on line 316 (for self) and line 318 (transferred to a supporting relative). If the medical practitioner charges to complete the T2201 form, applicants can claim this as a medical expense on line 330 of his/her tax return.

In addition to lowering taxes, qualifying for tax credits can also be a requirement for applying for other money-saving vehicles such as the Registered Disability Savings Plan.

Processing Time

The processing time for the DTC is at least 2 months. You can view the status of the T2201 submission by logging in to the CRA website, http://cra-arc.gc.ca/'' and clicking the "Benefits and Credits" tab at the top of the page, and then click the link to "Disability tax credit" from the "Credits" section. If it is processing, it will say something similar to:

"2004-2014 We are processing your information for the disability tax credit."

Transferring credits

If the person with the impairment does Not have a taxable income, he/she can transfer credits to a supporting relative such as a parent, grandparent, child, grandchild, aunt, uncle, niece nephew. It may also be transferred to a sibling but since this was only introduced in 2001 applicants may only retroactively transfer the amount to that date. The disability amount can be transferred in either its entirety or as the remainder of what the dependent was unable to claim himself or herself.