What is the disability tax credit and how does it work?
The Disability Tax Credit (DTC) is a non-refundable credit used to reduce your taxable income to zero; it’s designed to offset the extra living costs related to a disability.
- The DTC tax credit is non-refundable, which means it’ll benefit you in reducing your taxes owing. And it’s retroactive from previous years, if you qualify.
- You have to apply for it with a medical practitioner’s approval.
- It can be claimed for yourself or others who rely on you for daily assistance.
How do you qualify for the disability tax credit?
To qualify for the DTC, you must have a serious and prolonged physical or mental impairment. Depending on the situation, you may be able to claim this credit for yourself, or on behalf of your dependent, spouse or common-law partner.
Variations of the eligibility criteria are vast but the following are a few things to take into consideration when trying to figure it out; you experience difficulty performing activities of daily living such as walking, feeding yourself, hearing, speaking, or other debilitating conditions that affect day-to-day living. Answer a few questions here in order to determine if you qualify.
How is the disability tax credit calculated?
Disability Tax Credit Federal and Provincial Base Amounts for 2021
There are varying factors to take into account, such as severity, as well as the length of time you will be disabled, the province you live in also plays a role in the amount you will receive. This link will help you estimate the amount you will receive based on your personal circumstances.
Federal/Provincial Disability Amounts for 2021
|Province||Disability Amount||Supplement for children with disabilities||Allowable childcare/attendant care expense|
DTC Refund Methods
- Retroactive payment – One time Refund: If you file a claim for previous years, the CRA will review the application and you can be approved for a retroactive one time payment for up to 10 years, as long as you have filed your taxes for those years.
- Annually – Ensure that your DTC certificate is up to date because it does expire after a few years. You will then be able to claim it yearly on your tax return.
Claiming the DTC for Previous Years
If the CRA determines you should have been eligible for the DTC in previous tax years, you can file for this credit retroactively. To do so, file Form T1-ADJ, either via mail or using your CRA My Account. For every return you need amended, for up to the past ten years. The CRA will review your adjustment requests and send you any refunds you might be owed. For more detailed information, review this link from the CRA.
How to apply for disability tax credit
You may claim the disability tax credit for yourself, a child, or your spouse or common-law partner.
To apply; either the person with the disability, or a legal representative must fill out Part A of Form T2201. For example, if you are applying for the DTC for your child, you may act as the legal representative and fill out Part A of the form.
A medical practitioner is required to fill out Part B of the form. Depending on the type of impairment, a medical doctor, optometrist, audiologist, occupational therapist, psychologist, or speech-language pathologist can complete this section.
After the CRA receives Form T2201 – Disability Tax Credit Certificate, it’ll assess the validity of your claim.
- Once approved, the CRA will send a notice identifying the years for which you can claim the DTC. At the end of the identified time period, you’ll have to resubmit an application if you want to continue to claim the DTC.
- If the CRA chooses to deny your claim, gather additional information from qualified medical practitioners, and resubmit it to the CRA asking for a further review. Alternatively, you can file a formal objection within 90 days after the CRA sends you your notice of determination.
You’re able to view the status of your DTC online using CRA My Account.
Claiming the DTC for Yourself
How much can you claim?
If you personally qualify for the DTC, you may claim $8,662 for the disability amount on line 31600 of your tax return.
If you are under the age of 18, you may be eligible for an additional credit of up to $5,053 or a total credit of up to $13,715.
However, to qualify for these supplemental credits, no one must have claimed child care or attendant care expenses for you. If you claimed attendant care expenses on your own return, the amount of your supplemental credit may also be reduced. Review this link from the CRA for more detailed information.
Claiming the DTC for a Dependent
If an individual who isn’t your spouse or common-law partner, is dependent on you for basic needs, you may be able to claim all or a portion of their DTC. To qualify, the individual must be the child, parent, grandparent, grandchild, brother, sister, aunt, uncle, niece or nephew of either yourself or your spouse or common-law partner.
If you support a dependent who doesn’t fall into one of these categories, you may be able to claim a portion of their DTC. Your eligibility to claim their DTC depends on whether you claimed a dependent amount for that person on line 30500, or could have claimed that amount if you didn’t have a spouse or common-law partner.
To claim all or a portion of a qualifying dependent’s DTC, enter the amount not claimed by the dependent on line 31800 of your tax return. Make sure you note the dependent’s name, Social Insurance Number, and relationship to you so the CRA can reference both returns.
For example, if you have an eligible dependent who qualifies for a DTC of $8,662, but only owes $3,000 in taxes, that dependent can claim $3,000. The rest of the credit may be transferred to you.
Similarly, if your spouse or common-law partner qualifies for the DTC but doesn’t need all of the credit, the remaining credit may be transferred to you. Note these credits on line 32600, along with any other transfers from your spouse or common-law partner.
What Happens after I Apply?
Depending on your circumstances, the time it takes for the process can be up to 6 months. If your medical practitioner has to fill out a questionnaire based on the type of disability you have, this can take an additional few months.
There are various programs and benefits for individuals with disabilities available through the Government of Canada, such as;