While it can be irksome to pay taxes, the government does recognize some of the hardships that you might experience if you have a disability, or if you care for someone with a disability. As a result of your efforts, and in acknowledgment of the financial challenges that can come with this situation, you can take advantage of the disability tax credit if you qualify.
What is the Disability Tax Credit?
It’s important to note that the DTC is a non-refundable tax credit. This means that it can only bring your total tax bill down to zero. If you have left over money, or if you have no taxable income to begin with, your disability tax credit won’t result in a refund.
The DTC is designed to reduce the amount of income tax you pay as someone who is disabled, or as someone who cares for a disabled person.
Eligibility for the DTC
In order to be eligible for the disability tax credit, you need to have a physical or mental disability that affects the ability to perform daily living activities. An impairment that requires Life Sustaining Therapy can also qualify. If you want your condition considered a disability, you will need to apply to the CRA. Part of your application includes a T2201 form that must be filled out by a qualified medical professional.
Your condition must have lasted (or be expected to last) at least 12 months on a continuous basis in order to be considered a disability eligible for the tax credit. Children with certain conditions can be claimed as dependents on your tax form and can make you eligible for the tax credit. There are a number of conditions that make children eligible for the DTC, and it is worth checking with the CRA to see what qualifies.
Finally, if you realize that you have been eligible for the DTC and you haven’t taken advantage of it, you can apply for a reassessment of your taxes, reflecting the fact that you should have received the disability tax credit, for returns as old as 10 years.
Caregiver Disability Tax Credit
If you provide care for someone with a disability that meets the CRA requirements, you might be eligible for a caregiver tax credit. It’s also worth noting that your spouse can transfer the unused amount of his or her DTC to you, so that you can use it as well.
Another possibility is to make use of the Registered Disability Savings Plan (RDSP). This plan offers a way for contributions to be made for care. Unfortunately, though, the RSDP contributions made are not tax deductible. However, the government will partially match your contributions through the help of Canada Disability Savings Grants and Bonds. This can be helpful as you try to save up money to provide adequate care for a loved one with a disability.
There is no harm in applying for the DTC. If you think that you might qualify, or if you take care of someone who might qualify, consider filling out an application. It can provide you with some much needed financial help.