The disability tax credit is designed to provide financial relief to individuals with disabilities and their caregivers, and it may be claimed in addition to other deductions such as medical, childcare, and disability expenses. But how do you know if you actually qualify? Follow the proper procedure required for obtaining the credit, and also find out if you’re eligible for back payment for unclaimed assistance from previous years.
What Is the Disability Tax Credit?
The DTC is a non-refundable tax credit used to reduce income tax payable on the personal tax return of Canadian individuals. A person with a severe and prolonged impairment in physical or mental functions may claim the disability amount once eligible for the credit. This credit includes a supplement for persons under 18 years of age at the end of the year. If individuals do not have any taxable income or are unable to utilize the full amount of the credit, they may elect to transfer all or part of the credit to a spouse, common-law partner, or another supporting person.
What Are the Steps for Obtaining the Credit?
To qualify for this credit, an individual must undergo an examination from a medical professional — otherwise known as a qualified practitioner — and have them complete a T2201 Disability Tax Credit Certificate. Depending on the disability, you may need to see a medical doctor, optometrist, audiologist, occupational therapist, physiotherapist, psychologist, or speech-language pathologist. Once that form is complete, it must be submitted to the Canada Revenue Agency for approval.
If approved, the individual would be notified in a letter. If the CRA denies the claim, however, it will send a notice of determination to explain why the application was denied. One can then consider sending in additional information from a qualified practitioner that was not included on the first review for the CRA to review again. If the application is denied a second time, the individual has the right to file a formal objection to appeal the decision within 90 days of the determination. It is very important to make sure the qualified practitioner fully understands the form and completes it with all the necessary information. Be sure to disclose as much as possible and that the practitioner understands all of your issues to reduce the likelihood of rejection.
If the individual is receiving Canada Pension Plan or Quebec Pension Plan disability benefits, workers’ compensation benefits, or other types of disability or insurance benefits, it does not necessarily mean you will be eligible for the DTC and you must still have the form completed and obtain approval from the CRA. These programs have other purposes and different criteria, such as an individual’s inability to work.
Once the individual is approved, this credit can continue to be claimed so long as the circumstances do not change. There is no requirement to file a new certificate each year.
What if You Qualified, But Never Claimed Credit in Prior Years?
If you were eligible for the credit for previous years, but did not actually claim the disability amount when you filed your return, you can request adjustments for up to 10 years under the CRA’s Taxpayer Relief Provisions. To claim the disability amount for prior years, you will need to file Form T1-ADJ, T1 Adjustment Request, for each year you need to amend or send a letter containing the details of your request.
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