What is the Disability Tax Credit?
The Disability Tax Credit
The Disability Tax Credit is a safety net for Canadians living with a disability.
For the most part, Canadians are familiar with the Canada Pension Plan (CPP) and the services it provides them. Many Canadians, however, only think of the CPP as a program that is there to help them plan for retirement, and thus, only kicks in once they’ve retired. What some people aren’t aware of is that the CPP can also provide the partial replacement of earnings for people living with a disability.
The Disability Tax Credit is a non-refundable tax credit that helps people with disabilities or people they are supporting, reduce the amount of income tax they may have to pay. The primary goal of this tax credit is to ensure tax equity, which is achieved by providing relief from unavoidable costs that make life difficult for those living with a disability.
Canadians living with a severe and prolonged mental or physical disability can qualify.
The most important question to anyone who is curious about receiving the Disability Tax Credit is: Am I eligible? If you are living with a severe or prolonged mental or physical disability that prevents you from working and/or make performing everyday tasks difficult, then you are eligible to receive the Disability Tax Credit.
Beyond your disability, you must be between the ages of 18 – 65. You must also have contributed to the CPP for 4 of the 6 years prior to applying OR contributed for 3 of the past 6 years if you have contributed for at least 25 years.
If you have not contributed to the CPP, you can still be eligible. If you have a family member who supports you and pays their taxes, then you can claim the Disability Tax Credit on that family members’ taxes. Also, if you are under 18, you can receive this credit through the Child Disability Benefit.
How do I apply?
You apply for the Disability Tax Credit by filling out form T2201.
In order to be considered for the Disability Tax Credit, you must fill out form T2201, which can be found on the Government of Canada’s website. Once the application is completed, it must be submitted to the Canada Revenue Agency (CRA).
The CRA has money reserved to help people with disabilities, so they decide how that money is allocated. Your T2201 form must provide incontrovertible proof to the CRA that you are living with a severe or prolonged disability that is keeping you out of the workforce.
We have helped many clients with the T2201 form, ensuring that they receive up to $45,000 in tax credit. Additionally, our clients don’t pay us until they get approved for the Disability Tax Credit.