An Ultimate Guide For Child Disability Tax Credits in Canada
Let’s face it – understanding Government of Canada documents can be confusing. But that shouldn’t be the reason why you don’t reap the benefits of the services they offer.
If you’re looking after a child (under 18 years of age) with a long-term disability, you might be eligible for the Child Disability Tax Credit. But what exactly is it, and how do you apply it? Everything you need to know is right here!
Getting Started: What is the Child Disability Tax Credit?
There are several different tax credits for those with disabilities in Canada, including the Child Disability Tax Credit. It is assumed that children with disabilities will undoubtedly face additional, unavoidable expenses that would not be faced by other taxpaying families. Essentially, the credit is meant to offset these costs and keep the cost of living fair for most citizens of Canada.
In the case of a disabled child, the parents or legal guardians would accept the tax credit.
How Much Credit Can You Receive?
Not all disabled children are eligible to receive the Disability Tax Credit, but those who do meet the requirements could receive up to $2,395 per year, or $199.58 per month. Less would be awarded if the family also claims attendant care expenses, which will be discussed in further detail below.
Are You Eligible for the Child Disability Tax Credit?
In order to be eligible for the Disability Tax Credit (DTC), the child must have a serious and prolonged physical or mental impairment. Prolonged in this case means ‘more than 12 months’.
The impairment must markedly restrict the child in their ability to perform basic functions and activities that make up day-to-day living. They could also be eligible if their impairment would be prohibited but for regular and extensive therapy.
Canada Revenue Agency’s Definition:
A prolonged impairment means that it has lasted, or will last, a period of at least 12 months. Markedly Restricted means that 90% of the time or more, a person is unable (or it takes more time than the average person) to perform one or more of the basic activities of daily living even with therapy (other than life-sustaining therapy to support a vital function) and the use of appropriate devices and medication.
These impairments must be reported to the Canada Revenue Agency (CRA) with the Form T2201 Disability Tax Credit Certificate. A qualified medical professional must attest to each impairment.
Form T2201: Disability Tax Credit Certificate
In order to apply for the DTC, Form T2201 must be submitted to the CRA for review. You can easily find the form on the CRA website. For a guide on understanding the T2201 Disability Tax Credit, read our guide.
The form includes a self-assessment questionnaire to help you understand whether or not your child and therefore your family would be eligible for the tax credit. If the self-assessment leads you to believe that you would be eligible, continue filling out the form.
For many, the forms can be confusing. If you feel that you’re unsure of how to fill these out, ask a qualified tax accountant for help.
If you’re doing it yourself, we can help you understand the form. Following the questionnaire, the form is divided into two parts – Part A and Part B.
You will be required to fill out Part A which includes personal information regarding the child with a disability such as name, address, birth date, and Social Insurance Number (if applicable). Because the child is under 18 years of age, information will also be taken regarding the legal guardian or parent who will be receiving the tax credit. You will also need to explain the financial relationship between the child with the disability and the person claiming the disability credit. If the child lives at home with the parent, this will be easy. However, if another family member who lives elsewhere pays most of the bills – this must be noted and proven.
Part B, then, gets passed along to a qualified medical practitioner who can attest to the disabilities. Depending on the disability that is stated, an appropriate practitioner must be called on – in many cases, the medical professional must be a specialist. However, it’s best to check with the CRA to be sure about your particular case.
Once the form is complete, you must hand it over to the CRA before or with your yearly tax documents. If you wish to avoid any delays, it’s best to hand in the T2201 form months before taxes are due to leave room for any errors or clarifications that must be made. As well, it’s always a good idea to make a copy of every form you submit in case any documents get lost.
Can You Get Back-Dated Payments?
If the DTC is approved, it is possible to claim tax credits for up to 10 years if you have not done so already. The process is fairly simple as well. Just send a letter to the CRA explaining the time period for which you wish to receive payment, and any other identifying information. Once they accept the request, they will provide you with further details – and possibly even tens of thousands of dollars!
Repeating the Process Year After Year
Depending on the case, you might not have to re-apply each year. In the case of life-long disabilities such as autism or paralysations, you can continue to claim the rebate each year without reapplication. However, if the disability was likely to last more than 12 months but not more than 24 – you may have to apply once again with a new medical certificate.
Even if you are not in a position that needs the extra money each month, it is still a good idea to qualify, as qualifying for the DTC means that your child will be eligible for the Registered Disability Savings Plan which can, in the long run, help you save thousands of dollars for your loved one. If you need any further help understanding the process of application, don’t hesitate to contact a professional accountant.