More often than not, Canadians with disabilities and their families need a little help from the government. This is where the Disability Tax Credit (DTC) comes in handy. Established in 1988, this non-refundable tax credit was implemented to help relieve the financial burdens that come with living with a disability. The process received criticism initially due to the complex nature of the application process, as well as the many restrictions.
As of 2014, applicants enjoy a far simpler process. It has now become a tax credit that many Canadians rely on; but what exactly is the DTC, and is it something that can be beneficial to you? In this article, we help define what the DTC is, who it’s for and how you can apply.
The Disability Tax Credit
The Disability Tax Credit was put in place to help people with a severe and prolonged mental or physical disability. The DTC is meant to help alleviate some of the financial stress that comes with having a disability that keeps you from working and generating a liveable income.
The Disability Tax Credit works retroactively as well as currently. In other words, you can apply for the DTC retroactively for up to 10 years. You can also apply for the DTC if you have just been diagnosed or have started experiencing disability symptoms.
Am I eligible for the DTC?
It’s important to note that the Disability Tax Credit does not only apply to those with disabilities. Since many people with disabilities earn meager wages or are unable to work at all, the DTC can be applied to the person who supports them instead. So, if you are the spouse, common-law partner, parent, grandparent, grandchild, child, sibling, aunt, uncle, niece, or nephew of a disabled person, and you are supporting them, you can apply for the DTC.
As previously mentioned, the DTC is aimed to help those with prolonged or permanent disabilities. The impairment needs to result in significant disruption and restriction of the applicant’s life. When ADL, or Activities of Daily Living, are affected by the disability, this is usually a strong indicator of disability in Canada. ADL is summed up as basic activities as walking, lifting, carrying, bathing, dressing, and any other areas of personal care. Eligibility does not depend on the impairment but rather its severity. Some of the most common conditions accepted by the Canada Revenue Agency (CRA) as prolonged impairments include:
- Limited mobility problems (back and neck issues)
- Digestion problems (Colitis, Inflammatory Bowel Disorder, Problems with the prostate)
- Impaired hearing
- Impaired cognitive function (Dementia, Memory Loss, Alzheimer’s)
- Breathing conditions (Asthma, Tuberculosis, COPD, Emphysema)
- And many more
In order to claim DTC, you need to fulfill the following criteria:
- Be a Canadian citizen
- Provide evidence that your disability is affecting your ADL (activities of daily living). This will require an official medical assessment.
- Federal taxes in the years you are claiming the DTC MUST have been paid. If your income is too low and federal taxes were not paid, you will not receive tax credits.
- If you are claiming for another person, you need to prove that you are offering continued and ongoing support (paying rent, living expenses, etc.).
What about the DTC form T2201?
The T2201 is the form you need to complete in order to apply for the Disability Tax Credit. You can download the form from the CRA website, and your application will not be considered without a completed form. You will need to complete all the relevant information with care, and if you don’t understand something, it’s always better to ask an expert rather than completing the form incorrectly. There is a section to be completed by your doctor so sure not to do this section yourself.
You need to submit the actual hard copy of your application by mail. Applications by email or fax are not accepted.
How you should apply
There are three main ways of applying and each of them has its own pros and cons. Applying on your own is free but you stand a higher risk of being denied. If you are approved, you might not receive approval for the maximum time and you might not get as much out of the tax credit as you should. If you hire an accountant, they will help you complete the paperwork but you will pay a fee. They generally don’t take the time to really build a strong case for you which means that you might not get the maximum benefit.
The third option is to use a DTC service company. It will cost you a service fee but you will get an expert in your corner who will build the strongest possible case so that you can maximize your returns.
How long will it take?
Once you have submitted your paperwork, it takes 4 – 10 weeks to establish eligibility. Your doctor might be contacted during this time. Hereafter, the CRA conducts a refund assessment to determine the amount you are owed.
A disabled person can qualify for an annual credit of $1,500 – $2,000 or $3,000 – $4,000 for children with disabilities. There are a number of different refunds that can all be claimed once your DTC is approved, and you may even qualify for a supplementary amount. You will still need to file your taxes even if your DTC application is approved. Usually, you are approved for 3 – 4 years. In some cases, approval is granted for unlimited years. If your application is denied for whatever reason, you are also able to apply again but there are additional challenges since you were initially denied.
For expert assistance and your free Disability Tax Credit assessment, contact Tax Benefits Canada today!