The Disability Tax Credit (“DTC”) is a non-refundable tax credit available for individuals who have a severe disability.
By reducing the amount of income tax payable to the Canadian Revenue Agency (“CRA”), the DTC’s purpose is to provide greater tax equity and compensate disabled persons for disability costs, which other individuals do not pay. However, only 40% of the 1.8 million Canadians who live with severe disability use the DTC. Understanding the eligibility criteria and the benefits of the DTC may be helpful in determining whether you should pursue the credit.
ELIGIBILITY CRITERIA FOR THE DTC
To qualify for the DTC, a claimant must submit a set of documents including (1) a Form T2201 and (2) a Disability Tax Credit Certificate. The claimant (or family member) completes Part A of the form and their medical doctor or relevant practitioner fills out Part B. If claimants require assistance in completing the document, the CRA provides a toll-free help-line service through a ‘1-800 number’ displayed on the form.
Following this submission, the CRA will consider the application alongside a set of criteria. The CRA must approve your application before you can claim your DTC in your income tax return. Essentially, the DTC is available for people with a severe and prolonged physical or mental impairment, subject to CRA approval. The claimant must meet the following criteria:
The disability must be prolonged, which means the impairment has lasted, or is expected to last for a continuous period of at least 12 months;
The disability must be present all or substantially all the time (at least 90% of the time); and
The claimant must be one of:
Markedly restricted in at least one of the basic activities of daily living;
Significantly restricted in two or more or the basic activities of daily living (i.e. cumulative effect); or
Need life-sustaining therapy.
“Markedly Restricted” means that the person is unable or takes an inordinate amount of time (i.e. three times the average time) to do one or more of the basic activities of daily living, despite therapy, medications, and the use of appropriate devices. Alternatively, “Significantly Restricted” means that although the person does not meet the criteria for markedly restricted, their vision or ability to do a basic activity of daily living is still greatly restricted all or substantially all of the time. Basically, two or more significant restrictions is equal to being markedly restricted.
Basic activities of daily living include (1) speaking, (2) hearing, (3) walking, (4) eliminating (bowel or bladder functions), (5) feeding, (6) dressing, or (7) mental functions necessary for everyday life. Note that the CRA has informative videos on the level of disability required for a DTC.
After the documentation has been submitted, the CRA will assess your application to determine if you are eligibility based on the information given by the medical practitioner. The CRA will then send the claimant a Notice of Determination to inform them of the decision.
APPROVAL: CLAIMING THE DTC’S BENEFITS
If approved, the Notice will either show whether the DTC has been approved indefinitely or the years in which the claimant is eligible for the DTC. The approved person can claim the disability amount on their tax return following the Notice of Determination. If the claimant is the disabled party, this is done on line 316 of your tax returns. Additionality, where a child or other dependant doesn’t have any taxable income, a parent or other relative can claim the DTC (under certain conditions). To claim the disability amount for your dependant, see line 318. To claim the disability amount for your spouse or common-law partner, see line 326.
In 2018, the federal non-refundable DTC for an adult was $8,235. If the person with the disability is a child under 18, there is an additional supplement of $4,804, for a total DTC of $13,039.
If a person was eligible for the DTC for previous years but did not claim the disability amount when they sent their tax return, they can request adjustments. This allows reassessments for up to 10 years under the CRA's Taxpayer Relief Provision and may result in sizeable retroactive tax refunds. To do this, a claimant must file a form T1Adj for each previous tax year in which the disabled individual qualifies.
In a more indirect manner, DTC eligibility may open the door to other government programs such as the registered disability savings plan, working income tax benefit, and child disability benefit. The DTC is known as a “gatekeeper credit” for these programs in that it may initiate access to them.
DENIAL: ROUTES TO APPEAL
If denied, the claimant will receive reasons for denial as well as a series of options for appeal including (1) a request a review the application with new medical records and documentations or (2) a formal objection to appeal the initial decision (within 90 days).
TALK TO A PERSONAL INJURY LAWYER IN BARRIE
No matter the outcome, there are always routes to appeal and potentially, other sources of compensation. If you have been injured in a car accident or other incident and require legal representation to learn more about potentially available benefits, do not hesitate to contact our experienced personal injury lawyers at Littlejohn Barristers.