The Disability Tax Credit (DTC) is a Canadian tax law aimed at helping tax paying disabled Canadians, their families or supporters deal with the various financial implications and medical expenses of having a disability or a substantial impairment. Even though the Disability Tax Credit initiative has been available since 1988, it is still under-utilized and often misunderstood by most Canadians and their medical practitioners. Once approved for the DTC, you will be able to receive the refund you are deemed eligible for; as well as access to different governmental and provincial benefit programs, such as the Registered Disability Saving Plan (RDSP). For the above reasons, we have revamped our 2017 Ultimate Disability Tax Credit Guide, with new and detailed information and answers to most common questions regarding this initiative.
Table of Contents
- Disability Tax Credit Definition
- How Was The Disability Tax Credit Established?
- How Does The Disability Tax Credit Affect Your Other Governmental or Provincial Benefits
- How to Determine Your Eligibility for the Disability Tax Credit
- The 3 main impairment categories that determine the Disability Tax Credit eligibility
- What is “Markedly restricted” as it pertains to the eligibility for the Disability Tax Credit
- Life sustaining therapy as a Disability Tax Credit eligibility marker
- What is “prolonged impairment” as it pertains to the eligibility for the Disability Tax Credit
- The Disability Tax Credit refund methods
- What is the difference between The Disabled and The Claimant?
- Common Disability Tax Credit application methods
- Apply for the disability tax credit on your own
- Apply for the disability tax credit with help of an accountant or a bookkeeper
- Apply for the disability tax credit with help from a disability tax credit firm
- What are the 2 main components of The Disability Tax Credit certificate, Form T2201?
- Who can fill out Part B of the Disability Tax Credit Certificate Form T2201?
- What is the Disability Tax Credit Base Amount
- What is the Disability Tax Credit Supplemental Amount
- Disability Tax Credit Calculation Examples
What Is The Disability Tax Credit?
Disability Tax Credit Definition
The Disability Tax Credit is a non-refundable tax credit created by the Canadian Government and Canada Revenue Agency (CRA) in order to reduce the amount of income tax Canadians with disabilities and/or their families & supporters would have to pay annually.
How Was The Disability Tax Credit Established?
The Canada Revenue Agency (CRA) introduced the Disability Tax Credit initiative with the purpose of helping 22% of Canadians who are living with prolonged physical or mental impairment (CSD, 2017) and their families offset the various costs associated with those impairments such as medications, special equipment, personal support etc.
According to the findings from the 2017 Canadian Survey on Disability (CSD), one in five Canadians (6.2 million) has one or more disabilities that restrict the performance of their daily activities.
Prior to 1986, the Canada Revenue Agency had a standard deduction reserved for individuals who used wheelchairs or were blind. When more disabilities and mental illnesses became more visible and recognized, taxable income benefits were offered to the persons who suffered from these conditions as well.
In 2005, “prolonged impairments” became the key definition to help people determine their eligibility. This definition created a path for persons with disabilities that struggled with day-to-day common tasks to receive disability benefits.
How Does The Disability Tax Credit Affect Your Other Governmental or Provincial Benefits?
- Once found eligible for the Disability Tax Credit, you are also qualified to set up a Registered Disability Savings Plan (RDSP). The RDSP is a long-term savings plan providing benefits in the form of disability savings grants and bonds.
- The Disability Tax Credit is a federal program and it does not affect or alter your status of other government or provincial programs such as OSAP/student loans, ODSP (Ontario), AISH (Alberta), Disability Assistance (British Columbia), etc.
- As part of the Disability Tax Credit, the Child Disability Benefit is a tax-free monthly payment (not based on federal taxes paid) made to families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions.
What Are the Disability Tax Credit Eligibility Criteria?
To be eligible for the Disability Tax Credit you must:
- Be a Canadian citizen or Permanent Resident.
- Prove that either you cope with a prolonged impairment, marked restriction, have two or more significant restrictions, or you are dependent upon “life-sustaining” therapy
- You or your supporter paid federal taxes in the years you are claiming the Disability Tax Credit for.
How to Determine Your Eligibility for the Disability Tax Credit
The Disability Tax Credit is intended to help people who cope with a prolonged or permanent impairment. The impairment must cause a significant restriction in the person’s ability to carry out ‘activities of daily living’ (ADL).
The ADL, recognized as a strong marker for Disability Tax Credit eligibility in Canada, includes bathing, dressing, walking, carrying, lifting, and other elements of personal care.
The eligible impairments can be generally divided to 3 main categories. However, it is crucial to understand that the eligibility for the Disability Tax Credit is not based on the diagnosis of the impairment, but rather the severity of the impairment and the way it affects your ‘activities of daily living’ as described above.
The 3 main impairment categories that determine the Disability Tax Credit eligibility
The 3 main impairment categories that determine the Disability Tax Credit eligibility are:
- Chronic pain
- Visual Disabilities
- Hearing Disabilities
- Elimination Disabilities
Emotional, Mental or Psychological impairments
- Mood disorders (such as depression or bipolar disorder)
- Anxiety disorders
- Personality disorders
- Psychotic disorders (such as schizophrenia)
- Eating disorders
- Trauma-related disorders (such as post-traumatic stress disorder)
- Substance abuse disorders
NOTE: In regard to physical impairments, the disability must also affect the corresponding psychological activities of daily life such as making decisions, making judgement, memory, concentration, etc.
What is “Markedly restricted” as it pertains to the eligibility for the Disability Tax Credit
“Markedly restricted” is also identified as a qualifying criterion when:
- The individual is unable to perform, or take an inordinate amount of time to perform two or more of ADL’s listed above, even with therapeutic assistance, technological/adaptive devices, and/or medication
- “inordinate amount of time”: usually 3 times longer than the amount of time an abled person of the same age would take to complete the activity
- The severe restriction must affect the individual 90% of the time or more OR the combination of two or more moderate restrictions such as walking and dressing for example cumulatively add up to a 90 percent restriction
“Greg M, was diagnosed in 2005 with Osteoarthritis , underwent knee surgery in the same year due to tears in both knees. It takes him 3 times longer than a normal person to walk or perform any other activities in daily living. Greg has to sit to put on garments and socks. His wife does most of the housework due to his severe condition. Greg’s impairment is considered “markedly restricted” and his application was approved by the CRA”
Life sustaining therapy as a Disability Tax Credit eligibility marker
Life sustaining therapy is another marker Disability Tax Credit eligibility, where one must spend an excess of 14 hours per week on treatment required for survival such as insulin therapy, chest physiotherapy (helps with breathing), kidney dialysis (blood filter).
While the term “Life sustaining therapy” may sound daunting, it is recognized as a treatment that takes up a substantial amount of money and time. Therefore, individuals whose lives depend on life sustaining therapy are subject to receive the non-refundable tax credit to help alleviate the medical expenses, loss of income etc.
“Louis G, suffers from Type 1 Diabetes, is presently on injections 4 times/day. He has to take diabetes related tests daily, which takes up over 2 hours per day, and more than 14 hours a week. The daily injections and tests Louis has to take is considered life sustaining therapy”
What is “prolonged impairment” as it pertains to the eligibility for the Disability Tax Credit
The CRA has identified “prolonged impairment” as the working condition to determine one’s eligibility for the Disability Tax Credit.
Following are what they look for:
- The individual requires and receives extensive therapy to aid in performing activities of daily living
- The individual has had surgeries, hospitalizations, short- and long-term disability, employment restrictions, etc.
- The individual’s impairment has lasted, or is expected to last for a minimum of 12 consecutive months
List of prolonged impairments
The following is a list of some of the more common conditions that the CRA continues to mark one’s eligibility for the Disability Tax Credit:
- Digestion Disorders: Inflammatory Bowel Disorder, Colitis, Prostate Problems
- Limited Mobility Issues – Chronic Pain, Fibromyalgia, Arthritis, Spinal Stenosis, Ankylosing spondylitis, Back and Neck Problems
- Breathing Disorders: COPD, Emphysema, Tuberculosis, Asthma
- Hearing Impairments
- Cognitive Impairments: Memory Loss, Dementia, Alzheimer’s, traumatic and acquired brain injury, Parkinson’s.
- Psychological Disorders: ADHD, Autism, Depression, Panic Disorder, Mood Disorders, Bipolar Disorder, Psychosis.
- Autoimmune Diseases: Rheumatoid arthritis, Diabetes Type 1
How Does The Disability Tax Credit Work?
The Disability Tax Credit is a refund on federal taxes paid by Canadian individuals with disabilities OR their supporter. i.e. if the disabled person or their supporter have paid or are paying federal taxes (usually above 20-25k income). They will be able to claim and receive a portion of the paid amount should they qualify for the DTC.
The Disability Tax Credit refund methods
- Retroactive one-time refund – The CRA will evaluate your DTC application and if you were diagnosed or had the symptoms of the qualifying disabilities, they will approve you for the DTC for up to the past 10 years. If you or your supporter has been paying federal taxes during those years, you will receive a lump sum payment as a refund for the years you were found eligible.
- Annual refund – If your impairment started recently and you have been found eligible to receive the DTC, you will be able to claim the Disability Tax Credit refund annually when you prepare your taxes.
A key to understanding how the Disability Tax Credit works, is to understand the differences between the disabled and the claimant as it pertains to the Disability Tax Credit application process.
What is the difference between The Disabled and The Claimant?
When a person is applying for the Disability Tax Credit they can be both the disabled and the claimant but there are many situations where the disabled and claimant are not the same person so we must understand the difference between both.
o The Disabled:
The Disabled is the individual who has impairments or conditions that qualify them for the Disability Tax Credit.
In many cases, the person’s impairments may have prevented them from working and paying federal taxes. They will qualify for the DTC based on their impairments and can “transfer” those credits to their supporter who will then become the claimant.
o The Claimant:
In order to be considered as a claimant by the CRA you must meet the following criteria:
- Have proof of ongoing support for the disabled person for these necessities of life: food, shelter, and clothing.
- The disabled person is your spouse, common-law partner, parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew.
- Paying federal taxes is NOT an eligibility criterion for the DTC as it is not based on your income rather your impairments.
- Once you’re found eligible for the DTC and you want to maximize the refunds, you can transfer the credits to your supporter (some of the years or all of the years)
- In child DTC cases you don’t even need to have been paying federal taxes because if a child is found eligible for DTC the parent / guardian will have their Canada child benefits increased for those years.
How To Apply For The Disability Tax Credit?
As discussed in previous sections, the Disability Tax Credit application process is rather straight forward and can be done with relative ease. However, in order to get approved and gain access to the applicable refund, one must consider the route that works best for their situation.
Option 1: Apply for the Disability Tax Credit on Your Own
To apply for the DTC, all you must do is take the following steps:
- Download the T2201 Form from the CRA’s website
- Print the T2201 and take it to your health care practitioner to fill out and sign.
- Send the signed T2201 by mail to the CRA’s processing center
The main benefit of taking this “DIY” route is the minimal cost associated with it. There will be a cost of $25 up to $150 to be paid to the health practitioner as a fee for filling out the form.
However, there are a few drawbacks to the “DIY” approach:
- Many health practitioners are not familiar with the eligibility criteria and may not fully and thoroughly certify your condition.
- Your DTC application may result in a “follow-up questionnaire” request from the CRA. This questionnaire requires further details and in-depth explanation of your impairments and their effects on your “activities of daily living”, to be provided by your medical practitioner. Some medical practitioners may encounter confusion with this questionnaire as they must spend more time and effort with you and your DTC application. If not filled properly and accurately, your DTC application will be denied by the CRA.
- If your application is successful and you get approved for the DTC, you may not have the knowledge & understanding of how to maximize your credits and benefits applicable. Therefore, you may not have access to the maximum refund that is available to you.
Option 2: Apply for the Disability Tax Credit with the Help of An accountant or a Bookkeeper
All accountants and bookkeepers should know about the DTC as it is part of the Canadian Tax code. Once you inform your accountant about your qualifying disability, they will print out the T2201 and suggest that you have it filled out and signed by your doctor.
The main benefit again is the minimal cost involved: Most accountants consider this as a simple service and will not charge you for their advice.
There are a few drawbacks of using an accountant or bookkeeper:
- Accountants have very little knowledge of the actual eligibility criteria required by the CRA and they will usually just refer you to your doctor.
- If approved, the accountant may charge a flat fee as they will need to apply for the credits and benefits on your behalf.
The 2 options above can work well if the applicant’s impairments are severe and their medical practitioner has experience and understanding of the eligibility criteria for the Disability Tax Credit.
However, not all cases are “clear-cut” and simple. In fact, most DTC applicants may fall into a “gray area” where they may demonstrate some qualifying impairments but not enough to be found eligible.
Most importantly, we have found in the past that if your DTC application was denied by the CRA, reversing their decision is harder because you now have to “explain” your impairments in a different way and may even need to use a different medical practitioner.
Option 3: Apply for the Disability Tax Credit with the Help of a Disability Tax Credit Firm
Some disabled Canadians choose to go with the third option of hiring a specialized Disability Tax Credit firm to help them with the whole application process.
There are many benefits to working with a specialized Disability Tax Credit firm (like Disability Credit Canada):
- The firm has a strong understanding of the eligibility criteria and knows the specific CRA requirements for various disabilities.
- The firm will review your medical records and communicate with your medical practitioner. They will then work with them to fill out the T2201 certificate and if necessary, fill out the “follow-up questionnaire”.
- Once your Disability Tax Credit application is approved, the firm will apply for all credits and benefits and work towards maximizing the amount of refund you are eligible for.
- It is stress free – most of the work is taken care of by the DTC firm.
- Most DTC firms work on a NO WIN-NO FEE basis. They have an incentive to get you approved and gain you maximum refund. If the application is not successful, you don’t have to pay any cost. The only drawback to working with a DTC firm is the fee at the end of the process. Once your application is approved and you successfully gain access to the refund, you will be required to pay the firm a certain percentage off the retroactive refunds recouped by them.
What Is the Disability Tax Credit Certificate Form T2201?
In order to apply for the Disability Tax Credit, one must fill out Form T2201 also known as the Disability Tax Credit Certificate. You must have a certified medical practitioner sign the T2201 and then submit the signed form to the CRA as no application for the Disability Tax Credit is considered without it. You can find and download the T2201 form on the CRA’s website.
What are the 2 main components of The Disability Tax Credit certificate, Form T2201?
The Disability Tax Credit certificate, Form T2201 consists of 2 main components:
- Part A: You must enter the personal information of the disabled person as well as the claimant (if they are not the same person). Some of the information that you will be asked to provide in this section is Name, Address, Date of Birth, and Social Insurance Number.
- Part B: To be filled and certified by a medical practitioner (this part encompasses pages 3-6 of the T2201 Form)
- The medical practitioner will be asked to certify your medical state in areas including: Vision, Speaking, Hearing, Walking, Eliminating (bowel or bladder functions), Feeding, Dressing, and Mental Functions.
- Each respective part must be filled out by the corresponding health care practitioner. For example, the vision section must be certified by a medical doctor or optometrist and hearing section must be certified by a medical doctor or audiologist.
- Page 4 (top): This page is only to be completed if the disabled is on life sustaining therapy and must be completed by a doctor.
- Page 4 (bottom): This page is about the cumulative effects of the restrictions on your daily living.
Who can fill out Part B of the Disability Tax Credit Certificate Form T2201?
The CRA will not consider just any “medical practitioner” as a signing authority on the Disability Tax Credit Form T2201.
Below is a full list of different medical practitioners authorized to certify Part B of The Disability Tax Credit Certificate Form T2201:
- Vision: Medical doctor, nurse practitioner, or optometrist
- Speaking: Medical doctor, nurse practitioner, or speech-language pathologist
- Hearing: Medical doctor, nurse practitioner, or audiologist
- Walking: Medical doctor, nurse practitioner, occupational therapist, or physiotherapist
- Eliminating (bowel or bladder functions): Medical doctor or nurse practitioner
- Feeding: Medical doctor, nurse practitioner, or occupational therapist
- Dressing: Medical doctor, nurse practitioner, or occupational therapist
- Mental Function Necessary for Everyday Life: Medical doctor, nurse practitioner, or psychologist
- Life-sustaining Therapy: Medical doctor or nurse practitioner
- Cumulative Effect of Significant Restrictions: Medical doctor, nurse practitioner, or occupational therapist
In the 2017 Federal Budget, nurse practitioners (not to be confused with “registered nurses”) have been included in the list of medical practitioners authorized to certify DTC Certificates for any functions that medical doctors are authorized.
Providing Nurse Practitioners the ability to certify the Disability Tax Credit just like medical doctors is great news for Canadians living with disabilities where Nurse Practitioners are their first point of contact (e.g.: Canada’s North, remote communities etc.)
How Is The Disability Tax Credit Calculated?
Calculating the Disability Tax Credit and understanding how much money you will receive at the end of the DTC process can be a daunting task for a regular person who is not an accountant or a bookkeeper, so in order to simplify it one must understand that the Disability Tax Credit is comprised of a “Base Amount” and where applicable a “Supplemental Amount”.
Furthermore, the “Base Amount” and “Supplemental Amount” portions are given from both federal and provincial sources:
- The federal Disability Tax Credit portion is 15% of the disability amount for that tax year.
- The “Base Amount” maximum for 2019 is $8,416, according to CRA’s Indexation Chart
- The supplemental amount for children with disabilities is a maximum of $4,909 (2019) According to the CRA’s Indexation Chart
- The provincial Disability Tax Credit portion is approx. 10% (percentage varies from province to province) of the disability amount for that tax year.
The Disability Tax Credit Base Amount
If the eligible person is an adult, he/she will receive the federal and provincial “Base Amount” ONLY. For example:
- The federal disability amount for 2018 is $8,235 and 15% of that is $1,235.25
- The provincial disability amount in Ontario for 2018 is $8,365 and 10% of that is $836.5
Therefore, a DTC eligible adult in Ontario would have received $1,235.25 + $836.5= $2,071.75
The Disability Tax Credit Supplemental Amount
If the eligible person is under 18 years of age at the end of the tax year then he/she will be eligible to receive the “Base Amount” as well as the “Supplemental Amount”.
- The federal supplemental disability amount for 2018 is $4,804 and 15% of that is $720.6
- The provincial supplemental disability amount in for 2018 is $4,879 and 10% of that is $487.9
Therefore, a DTC eligible MINOR in Ontario would have received:
- “Base Amount” as calculated above of $2,071.75
- “Supplemental Amount” of $720.6 + $487.9= $1,208.5
If we add “Base Amount” and “Supplemental Amount” we will see that an eligible person under 18 years of age in Ontario would receive $3,280.25 in Disability Tax Credits for the 2018 tax year.
In order to make it even easier to understand and to be able to calculate the approx. Disability Tax Credits you are eligible for you can follow the formula below:
- An eligible adult can receive a total of $1,500-$2,500 per year of eligibility
- An eligible Minor can receive a total of $3,000-$4,500 per year of eligibility
To summarize, in order to calculate the total amount of disability tax credit you stand to receive, you need to multiply the number of years by the amount per year.
Disability Tax Credit Calculation Examples
- If an adult is found eligible to receive the Disability Tax Credit for the past 10 years, he/she will receive between $15,000 and $25,000 in a lump sum amount.
- If a minor is found eligible to receive the Disability Tax Credit for the past 10 years, he/she will receive between $30,000 and $45,000 in a lump sum amount.
If your Disability Tax Credit application has been approved and you are trying to figure out how much you’ll be receiving, our Disability Tax Credit Calculator is available here to help you further understand and estimate your refunds.
MAXIMUM DISABILITY AMOUNTS (FEDERAL)
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