Disability tax credit
Hi, I'm Kelly.
Today we will give you a series of presentations that will answer the following questions:
What is the disability tax credit and how do you apply for it?
What is a registered disability savings plan, and, once I've established a plan, how do I make withdrawals?
Will income tax be deducted on my withdrawals?
This segment is about the Disability Tax Credit, which is also known as the DTC.
What is the DTC?
The DTC is a non-refundable tax credit used to reduce the income tax that an eligible person or their supporting person may have to pay.
A non-refundable tax credit means that it may reduce the amount of tax payable to zero.
Who is eligible to claim the disability tax credit?
To be eligible…
A person must have a severe impairment in physical or mental functions.
The impairment must be prolonged- meaning, it must have lasted, or is expected to last, for a continuous period of at least 12 months.
The person must be restricted at least 90% of the time.
You are considered markedly restricted if all, or substantially all of the time (at least 90% of the time), you are unable or it takes you an inordinate amount of time to perform one or more of the basic activities of daily living, even with therapy and the use of appropriate devices and medication.
Eligibility is not based on the medical condition itself but rather on the effects that the impairment has on a person.
Here are two examples to help you understand eligibility:
Example 1- A woman has a stroke and is paralyzed for 12 consecutive months. She will qualify for the DTC as she is unable to perform many of the basic activities of daily living.
Example 2- A man has a stroke and has trouble walking for three months, then through therapy is able to walk almost as fast as before. He will not qualify for the DTC.
Please note, if you are receiving disability payments from the Canada Pension Plan, the Quebec Pension Plan, or a provincial workers' compensation program, you are not automatically eligible for the disability tax credit. These programs have other purposes and different rules, such as a person's inability to work. You must apply separately for the DTC.
Here are the different categories under which a person can apply for the DTC:
- Eliminating - which means bowel or bladder functions
- Mental functions necessary for everyday life
- Life-sustaining therapy
- Cumulative effect of significant restrictions
For life-sustaining therapy you must meet both of the following criteria:
- The therapy is required to support a vital function and
- The therapy is needed at least 3 times per week, for an average of at least 14 hours per week.
An example of life-sustaining therapy is kidney dialysis.
Cumulative effect of significant restrictions
This means that although you do not quite meet the criteria for markedly restricted, but you are still substantially restricted in two or more basic activities of daily living at least 90% of the time, you may be eligible for the DTC.
Here's an example of the cumulative effect of significant restrictions. An elderly woman with severe rheumatoid arthritis takes a long time to walk and dress on a daily basis. The extra time it takes to perform these two activities is equivalent to being markedly restricted, such as taking an inordinate amount of time in a single basic activity of daily living.
Completing Form T2201, Disability Tax Credit Certificate
First of all, it's important to mention CRA reviews its forms and publications every year. Please make sure you have the latest version from the CRA website.
There are 3 steps to apply for the DTC.
Fill out Part A of Form T2201, Disability tax credit certificate, with your basic personal information. The form is also available in other formats such as e-text, braille, and large print.
Ask your qualified practitioner to fill out and certify Part B of Form T2201. A qualified practitioner may be a:
- Medical doctor
- Occupational therapist
- Psychologist, or
- Speech-language pathologist.
Make sure you are going to the correct qualified practitioner to have Form T2201 completed. The CRA does not charge any fees to process the form, however, a qualified practitioner may charge a fee to fill out Part B of the form.
Once the form has been filled out, keep a photocopy. Send the original certified and signed form to the DTC Unit of your tax centre. The address for your tax centre is on the form.
Upon receipt of your Form T2201, the CRA will review it to make certain you meet the eligibility requirements. If the CRA needs more information, they may contact you or your qualified practitioner directly.
While the CRA always does its best to process forms as quickly as possible, review times may vary on the time of the year and the number of requests the CRA has on hand. There might also be a delay if the form was not filled out completely.
You may send the form to the CRA at any time during the year. You don't have to wait until you file your income tax and benefit return.
Once the CRA has reviewed the form, they will send you a letter to tell you if you're eligible and, if not, why your request was not accepted.
You don't need to submit a new form every year. You only need to send a new form if the CRA asks for one. You must also inform the CRA immediately if your condition improves.
Claiming the disability amount
If you're eligible for the DTC, you may claim the disability amount on line 316 of your income tax and benefit return.
The disability amount may be transferred between spouses or common-law partners on line 326.
You may also make a claim for an eligible dependant for the disability amount on line 318.
A dependant may be your or your spouse's or common-law partner's child, grandchild, brother, sister, niece, nephew, aunt, uncle, parent, or grandparent.
The DTC may be retroactive for up to 10 years. If your severe impairment predates the time that you applied and the qualified practitioner is able to support the claim, the CRA may give the DTC on a retroactive basis for up to 10 years. For example, a request made in 2013 will be accepted only for 2003 and later tax years.
You may also change your income tax and benefit return online for the two previous years if you have registered for the CRA's online service such as My Account.
If you are eligible for the DTC, you may be eligible for other related programs for persons with disabilities such as:
- Registered Disability Savings Plan
- Working income tax benefit disability supplement
- Child disability benefit, and
- Additional amounts for children's arts and fitness tax credits.
For more information on the DTC and the disability amount, call 1-800-959-8281. If you need to use a TTY, please call 1-800-665-0354, or you can go to our Website at www.cra.gc.ca/disability. You can also refer to our General Income Tax and Benefits Guide.
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