The disability tax credit (the “DTC”) is a non-refundable tax credit designed to help defray the unavoidable costs associated with an individual’s disability. The DTC is available either to the person with the disability, or to a person supporting the disabled person. For the 2018 year, the federal disability amount is expected to be approximately $8,235, resulting in a maximum DTC of $1,235 ($8,235 x 15%), while the Ontario equivalent is expected to be approximately $8,365, resulting in a maximum Ontario disability tax credit of $422 ($8,365 x 5.05%).
Although it is an important tax credit, the Canada Revenue Agency’s (the “CRA”) administration of the DTC (such as assessment of eligibility criteria and a cumbersome and confusing application form, among other reasons) has been much maligned. As a result, a recent review of the DTC by the University of Calgary found that of the roughly 1.8 million Canadians living a severe disability, only 40% of those people are claiming the DTC.
With that said, we strongly encourage people living with a severe disability, whether physical or mental, to make an application for the DTC for the following reasons:
- Proposed in the 2017 federal budget, and implemented administratively by the CRA as of March 22, 2017, nurse practitioners are now allowed to certify eligibility for all types of impairments, within the scope of their respective fields. Prior to this change, only medical doctors, audiologists, occupational therapists, optometrists, physiotherapists, psychologists, and speech-language pathologists were allowed to make DTC certifications.
This change is a hugely welcome one. One of the main criticisms of the DTC application process is that the application form is time-consuming to complete with guidelines that are unclear. As a result, some physicians refuse to fill out the forms, especially when it comes to mental health disabilities. Adding another source that can certify DTC applications should help increase the number of applications that medical practitioners, as a whole, can process.
- Many people are not aware that the credit becomes available not on the day that the CRA approves the application but rather the effective date of the disability or impairment. For example, a 3 year-old toddler that is diagnosed with autism was born with that impairment. Therefore, the DTC could be claimed by a parent in each of the years since birth. In addition, the new DTC application form has an election (i.e.: a box to tick) to request the CRA to calculate and process the DTC for each of the years since the effective date. In the past, a taxpayer would have to file adjustment requests with the CRA for each year.
- An approved DTC from the CRA is a powerful tool for a person with a disability, or the persons caring for that individual, as it can unlock a bevy of other benefits and credits, some of which are received tax-free. For example, if you have a child under the age of 18 who qualifies for the DTC, the Child Disability Benefit (the “CDB”) may become available. The CDB is a tax-free benefit of up to approximately $2,700/year and if you already receive the Child Care Benefit (the “CCB”) as well, the CRA will automatically calculate and process the CDB for the current year and the prior two tax years. A letter can be submitted to the CRA, as well, to request CDB benefits backdated to the effective date of the disability or impairment.
The potential credits and benefits available for an individual with a severe disability or impairment are quite extensive but remain a largely untapped resource for such Canadians.
As the 2018 tax season is upon us, please do not hesitate to contact the experienced accountants at Hogg, Shain & Scheck for a review of your tax situation to see what steps and actions can be taken to help reduce your tax bill.