It is estimated that a staggering 20% of the Newfoundland and Labrador population, over 100,000 residents, live with an impairment of some kind. If you or a family member are one of them, we would like to help you by shedding some light on the Disability Tax Credit program, how it works, and, more importantly, help you understand the specifics relevant to Newfoundland and Labrador.
In general, the Disability Tax Credit (DTC) is a non-refundable federal tax credit aimed at reducing the amount of taxes disabled people pay. It was designed to alleviate the various costs attached to living with an impairment, such as treatments, medication, special education programs, and other additional fees.
If found eligible for the DTC, an adult can receive approximately $2,000 per year, and if you care for a child with impairments, you can receive about $4,000 per year in credits and benefits.
Furthermore, when approved, you can also receive a retroactive payment that comes in one lump sum of up to $20,000 as an adult and up to $40,000 if you’re under 18. You can receive a retroactive payment for up to 10 years if you can prove that your impairment has been present and you or your supporter have been paying into federal taxes during those years.
Throughout this article, we will explain the Disability Tax Credit, how much a person (adults or children) in Newfoundland and Labrador stands to receive if eligible, and other benefits or programs available in the Province.
What is the Disability Tax Credit?
The Disability Tax Credit is a non-refundable tax credit that the Canadian Government and Canada Revenue Agency created to alleviate the financial burden for those with disabilities by reducing the amount of income tax they pay. If the person found eligible is under 18 at the end of the year, DTC will also provide extra credit/refund (supplement).
To be considered eligible for DTC, you must demonstrate difficulty performing activities of daily living like walking, feeding yourself, hearing, speaking, or other debilitating conditions that affect day-to-day living.
The amount received from the tax credit comes from both Federal and Provincial sources. The Federal amount is the same across the country, but the Provincial amount differs from Province to Province.
After being found eligible for DTC, many other federal, provincial, or territorial programs such as RDSP, Canada Worker’s Benefit, and the Child Disability Benefit are available to you.
A later section will illustrate how to calculate the Newfoundland and Labrador Provincial disability amount given to those accepted for the Disability Tax Credit.
What is the Child Disability Tax Credit and the Child Disability Benefit?
The Child Disability Tax Credit is the same as a regular adult Disability Tax Credit – both the eligibility criteria and application process are identical. The main difference between an adult DTC and a child DTC happens at the refund calculation stage as it is done AFTER the person is found eligible.
If an adult is found eligible for the DTC, they will get a refund based on the amount of federal taxes paid. If a child (under 18) is found eligible for the DTC, their supporters (parents or guardians) may receive two different refunds:
- Refund on federal taxes paid: If the supporter of the impaired child has paid into taxes, they will receive the same credits/refunds as an adult claimant would.
- Child Disability Benefits: Regardless of whether the supporter has paid into taxes, they will receive the Child Disability Benefits to assist in caring for the impaired child.
The Child Disability Benefit (CBD) directly helps Canadians raise their children with impairments, meaning you can still receive CDB even if you have no taxable income for the year. It is a supplemental benefit added to Canada Child Benefit’s base if the disabled individual is below 18 years of age.
To learn more about the Child Disability Tax Credit check out our in-depth guide.
Who is Eligible for Disability Tax Credit?
Many Canadians are unaware of their Disability Tax Credit eligibility as they believe that they are only available to those who are severely disabled. To qualify for Disability Tax Credit, you must prove that your mental, neurological, or physical impairment is severe enough to cause a significant impact on your daily life and prevent them from supporting yourself and your family.
The Three Main Impairment Categories that Determine the DTC Eligibility
There are three main categories, all with numerous associated conditions, that are used to determine eligibility for DTC, those being:
- Physical Impairments
- Mental Illness and Psychological Impairments
- Neurological impairments
Even if you are diagnosed with one of the following impairments, you are not automatically eligible for DTC. Eligibility is based on the severity of your impairment and its effects on your ‘activities of daily living.’
Activities of daily living or ADLs refer to the basic self-care activities done daily and are fundamental in caring for oneself and maintaining independence.
To be considered eligible for DTC, your impairment or disability must seriously affect the consistency and brevity of one or more of your ADLs’ performance.
“Markedly Restricted” as it Pertains or to Eligibility for DTC
Markedly restricted is a term often used when considering if one is eligible for DTC. Here are some examples of what being markedly restricted means:
- Cannot perform or take an inordinate amount of time (three times longer than an abled person of the same age) one or more activities of daily living, even after medication, treatment, or technological aid.
- Restrictions caused by the impairment must be present 90% of the time or more – or if a combination of two or more moderate restrictions like walking or dressing cumulatively adds up to 90% of the time, it would also be considered markedly restricted.
Life-Sustaining Therapy as a Disability Tax Credit Eligibility Marker
Another term often used when determining DTC eligibility is life-sustaining therapy. The term life-sustaining therapy in the context of DTC eligibility refers to someone spending 14 hours or more each week on life-sustaining treatments, such as insulin therapy, chest physiotherapy (helps with breathing), and kidney dialysis (blood filter).
To learn more, read our Disability Tax Credit Eligibility article.
What are the Benefits of the Disability Tax Credit?
The DTC can offer substantial financial help to individuals and families in Newfoundland and Labrador, but also, if found eligible for the DTC, one can tap into other programs.
The direct financial benefits for an adult resident can be around $1,500~$2,000 per year, and the child’s parents can receive as much as $4,000 per year in credits and refunds.
You may also qualify for additional programs and services, such as:
- Registered Disability Savings Plan (RDSP)
- Canada Disability Savings Bond
- Canada Disability Savings Grant
How is the Disability Tax Credit in Newfoundland and Labrador Calculated?
If you’re trying to figure out how much you’ll be receiving, our Disability Tax Credit Calculator is available here to further understand and estimate your refunds.
You can also stand to make upwards of $20,000 as an adult and up ot $40,000 if under 18 through a retroactive refund. The CRA will examine your DTC application to see how long you have been diagnosed or experiencing symptoms of the qualifying disabilities; they can then approve you for the DTC for up to the past ten years. If you or your supporter have been paying into federal taxes during those years, you will receive a lump sum payment as a refund for the years you were found eligible.
Calculating how much you can make through the retroactive payment is simple – you take how much you stand to earn each year through DTC and multiply that by how many years of retroactive payment you have been approved for.
We have provided the amounts and examples of what you could save due to DTC’s tax break.
Federal Base Amount and Supplement Amount Table for Last 10 Years with 2020 Amount
|Year||Federal Base Amount||Federal Supplement amount|
Newfoundland and Labrador Base and Supplement Amount Table for Last 10 Years with 2020 Amount
|Year||Provincial Base Amount||Provincial Supplement amount|
The DTC is comprised of a “Base Amount” and, where applicable, a “Supplemental Amount,” both of which come from federal and provincial sources:
The federal DTC portion is 15% of the disability amount for that tax year.
The provincial DTC portion is approx. 10% (percentage varies from province to province) of the disability amount for that tax year. If the eligible person is an adult, they will receive the federal and provincial “Base Amount” ONLY. For example:
Newfoundland and Labrador DTC Calculations for Adult
The federal disability amount for 2020 is $8,576, and 15% of that is $1,286.40
The provincial disability amount in Newfoundland for 2020 is $6,409, and 10% of that is $640.90
Therefore, a DTC eligible adult in Newfoundland would have received $1,286.40 + $640.90 = $1,927.30
Newfoundland and Labrador DTC Calculations for Child
If the person eligible for DTC is under the age of 18 at the end of the tax year, they will be eligible for the “Base Amount” as well as the “Supplemental Amount.”
The federal supplemental disability amount for 2020 is $5,003, and 15% of that is $750.45
The provincial supplemental disability amount is for 2020 is $3,016, and 10% of that is $301.60
Therefore, an eligible minor in Newfoundland and Labrador would receive:
“Base Amount” as calculated above of $1,927.30
“Supplemental Amount” of $750.45 + $301.60 = $1,052.05
If we add “Base Amount” and “Supplemental Amount,” we will see that an eligible person under 18 years of age in Newfoundland and Labrador would receive $2,979.35 in Disability Tax Credits for the 2020 tax year.
How to Complete Your Disability Tax Credit Application
It is important to note that Applying for Disability Tax Credit is free, it can be done by any Canadian as many times as they want. All you need to do is download the Disability Tax Credit Form (T2201), print it out, take it to your doctor to certify (the medical practitioner usually charges anywhere from $50 to $150), and once certified, send it to the CRA.
The DTC application process as described above is straightforward and can be done in a few short steps. However, applying and qualifying are two different things. Applying is easy and simple, qualifying is not so easy and a large percentage of applicants do get denied for a multitude of reasons.
In general, there are three main routes you can follow when applying for the DTC:
Completing the Disability Tax Credit Application Independently
Applying independently can be done by simply completing 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 centre.
The benefit of applying alone is that it is cost-effective. However, there are many drawbacks to applying alone, such as limited knowledge of eligibility, lack of knowledge of DTC in general, and inability to maximize returns.
Completing the Disability Tax Credit Application with the Help of An Accountant or a Bookkeeper
You can also enlist others to assist you in completing your Disability Tax Credit application, such as an accountant or a bookkeeper, both of which will be reasonably familiar with the tax credit and will charge very little.
Both the benefits and drawbacks that come with applying independently are also prevalent when applying with the help of an accountant or bookkeeper, meaning minimal fees at the expense of limited knowledge.
Completing the Disability Tax Credit Application with the Help of a DTC Firm like Disability Credit Canada.
DTC firms handle each step of the process, have extensive knowledge, and work on a NO WIN, NO FEE basis – meaning they are incentivized to get you the most out of DTC refund as possible.
As mentioned previously, applying to DTC is easy, but being approved can be very difficult. You need to carefully and thoroughly build a case that clearly portrays your condition and the impairments that come with it, so hiring a team with extensive knowledge like a DTC firm is the best way to ensure your application is approved.
To learn more about each option for applying to DTC, check our Disability Tax Credit Application Process guide.
Common Reasons for DTC Denial
Not all cases are straightforward. A majority of DTC applicants will fall into a “gray area” where they may have qualifying impairments, but they are not enough to make them eligible for the program. Because of this, a majority of DTC applications are denied.
There are numerous reasons one could be denied for DTC, some much more clear-cut than others. Here are some of the most common reasons for denial when filling out your DTC form to give you a good idea of what to avoid when filling out your DTC form.
- Missing or incomplete information on t2201 form.
- Lack of knowledge of DTC.
- Inconsistent of medical diagnosis.
- Impairment didn’t qualify.
- Duration of impairment too short
- Cumulative effects of impairment not included.
- Lack of supporting medical documents to prove the severity of your condition.
To learn more about the various reasons for DTC denial check out our comprehensive Disability Tax Credit Resource guide.
What are Other Disability Programs Available for Newfoundland and Labrador?
On top of Disability Tax Credit, many other disability programs are designed to help disable and impaired Newfoundland and Labrador inhabitants.
Some examples of some of the disability programs available are:
- The Coalition of Persons with Disabilities – Newfoundland and Labrador is a charitable, not-for-profit organization to inform, educate, and build awareness of issues surrounding disability.
- The Newfoundland & Labrador Association for Community Living (NLACL) is a not-for-profit organization that works with and on behalf of persons with intellectual disabilities in Newfoundland and Labrador, creating initiatives to help individuals with intellectual disabilities as well as their families and communities.
- Programs Funded through the Department of Health and Community Services offer numerous benefits and programs to help disabled Newfoundland and Labrador inhabitants find assistance.
The Disability Tax Credit was created to help working individuals with disabilities continue to live their lives by easing financial burdens. There is no cost associated with applying, so apply today and discover if you qualify for Disability Tax Credit in Newfoundland and Labrador.
Apply today and find out which tax savings you are eligible for so you can better support yourself and your family.
Call us today for help with your disability tax credit in Newfoundland and Labrador.