What is the Disability Tax Credit?

Disability Tax Credit

The Disability Tax Credit was established in 1988 by the federal government to provide for greater tax equity for persons with a disability and their families that have disability related expenses that other tax payers do not have. The Disability Tax Credit is non-refundable, which means that you will pay fewer taxes, but you will not get a refund and is only available for people who suffer from a severe and prolonged physical or mental impairment.

Because disabled persons often may not earn an income, or if they do, they earn a small income, the Disability Tax Credit can be used by another person who supports the disabled person. A supporting person can be a spouse or common-law partner, parent, grandparent, child, grandchild, sister, aunt, uncle, nephew or niece of the disabled person.

Qualifying

To qualify for the Disability Tax Credit before you file your income tax return for the years you are claiming the credit, you must submit an application to Canada Revenue Agency (CRA), which it will review to determine whether to approve your application. The application is comprised of two parts; on completed by the disabled person, or a family member, and another completed by a medical practitioner who will certify that the disabled person has a severe and prolonged impairment. The medical practitioner must describe the effects of the impairment, which can be physical, emotional/psychological, or neurological in nature.

The CRA, when determining if a person meets the test of “Prolonged Impairment”, looks to see that the person requires and receives extensive therapy to aid in the performance of his or her activities of daily living, and that the impairment has lasted, or is expected to last a minimum of twelve consecutive months. The impairment must be present all or substantially all the time (at least 90% of the time).

Eligibility

There are different ways that a person can be eligible for the Disability Tax Credit; however, in all cases the impairment must be prolonged. The disabled person must also show that he or she is:

• blind;
• markedly restricted in at least one of the basic activities of daily living;
• significantly restricted in two or more of the basic activities of daily living; or, needs life-sustaining therapy.

Activities of daily living include elements of self care such as self-feeding, bathing, dressing, grooming, and functional mobility.

Approval

The CRA may approve an application indefinitely, or for a specified period.

Depending on the onset of disability, a disabled person may use the credit in the current year and retroactively up to 10 years prior. For retroactive application of the Disability Tax Credit, you will have to fill-out the applicable form for each previous year in which the disabled person qualifies, under the Taxpayer Relief Provision of the CRA.

In addition to showing that you have a severe and prolonged disability, you must be a Canadian citizen, and you must have paid federal income taxes in the years for which you are claiming the Disability Tax Credit. If your income is too low and you did not pay federal income taxes, you will not be able to get the Disability Tax Credit.

If you are claiming the Disability Tax Credit as a support person you must prove that your ongoing support to the disabled person, such as paying their rent, living expense, etc.

Keep in mind that if you have been approved for Canada Pension Plan disability benefits, WSIB benefits, or other types of disability or insurance benefits, it does not mean that you are eligible for the Disability Tax Credit, because these other government programs have their own purpose and eligibility criteria.

Importantly, approval for the Disability Tax Credit allows access to other federal, provincial, or territorial programs, such as being able to open a Registered Disability Savings Plan, which will allow you to receive the Canada Disability Savings Grant and the Canada Disability Savings Bond, among other benefits.

This process can be confusing and lengthy. For more help contact an experienced lawyer.