Disability Tax Credit: Are you missing out on this misunderstood tax credit?

Though many are aware that the disability tax credit is available for those who suffer from a “severe or prolonged physical or mental impairment,” many taxpayers may not fully appreciate the scope of impairment included in this CRA definition.

The disability tax credit is not just for the severely disabled. That said, there are still strict criteria that must be met in order to qualify.

What is the Disability Tax Credit?Image of man using crutches for article regarding disability tax credit

The disability tax credit or DTC is a non-refundable tax credit to help people cope with their disability. It is also designed to help supporters, such as parents, reduce the amount of income tax they must pay. There is also a supplement available for people under 18 years of age at the end of the year. The whole point of these tax credits is to provide a more level playing field by allowing some tax relief for costs associated with disabilities. These necessary expenses for the disabled or those supporting the disabled may be costs that most taxpayers do not face.

The amount of the federal disability tax credit is $8,113 for 2017, with a supplement of $4,732 for 2017 for taxpayers under 18 years of age.  Provincially, the tax credit ranges from $6,058 to $14,417 depending on your province of residence.

The supplement is reduced when total child care and attendant care expenses claimed for the taxpayer under 18 exceed a threshold ranging from $4,884 to $5,722 in 2017 and eliminated completely when those expenses exceed $12,779 to $21,273 for 2017, depending on your province of residence.

This equates to about $1,600 for Ontario residents to about $2,600 if you reside in Alberta, in annual savings for the disability amount, and about $2,500 for Ontario residents to approximately $4,400 per year for residents of Alberta, when you include the supplement for taxpayers under the age of 18.

A bonus is that you may be entitled to retroactive tax credit refunds for up to 10 years if the disability existed in the past but you failed to apply for it.  We have examples of clients who have been able to file for prior years, resulting in up to $25,000 in retroactive tax credit refunds. Interestingly, Form T2201 (referred to below), now makes it simple to apply for previous tax years to be automatically adjusted, so it doesn’t require any filing of adjustments to make the claim.

Related Article: Three D's of Tax Planning

Who is eligible for the DTC?

You are eligible to receive the DTC once Form T2201 has been approved by the CRA. You will need to have a medical practitioner fill out this form and certify that you indeed have a severe and prolonged impairment with a description of how it affects activities of daily living. Effective March 22, 2017, a nurse practitioner can certify eligibility for the DTC for all types of impairments. Other medical practitioners that can certify in their respective fields include audiologists, occupational therapists, optometrists, physiotherapists, psychologists and speech-language pathologists.

The form is quite easy to complete and if the medical practitioner charges a fee to complete the form, that fee may be claimed as a medical expense. You may still want to speak with your tax professionals regarding your circumstances to get advice, but the completion of Form T2201 likely does not require assistance.

Eligibility for the DTC may include less apparent disabilities. According to the CRA, to qualify, you must meet one of the following criteria:

  • blindness
  • 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
  • require life-sustaining therapy

The disability must also be prolonged and present at least 90% of the time.

Of course, every scenario is reviewed on a case by case basis by CRA to determine eligibility. However, some conditions that may qualify include:

  • Type 1 Diabetes
  • Learning disabilities such as ADHD, ADD and Autism
  • Cognitive disorders such as Dementia and Alzheimer’s
  • Severe hearing Loss – even with the use of a hearing aid
  • Crohn’s Disease
  • Epilepsy

Some may hesitate for fear that they will be labeled as “disabled,” but it is important to note that all claims and benefits for the DTC program remain confidential within the CRA. The CRA is bound by the Federal Privacy Act guidelines that prohibit them from disclosing your private income tax information with any other entity without your written consent.

Not sure if you qualify? It is best to speak with an experienced accountant to discuss your personal circumstances. There are also various companies that claim they will help you qualify to receive the Disability Tax Credit – however, “buyer beware” certainly applies here. Some of these companies have been charged with obtaining the refunds fraudulently, whereby taxpayers may end up repaying their refunds in the future if they are not legitimate. Please see the following article from the CBC.

It is best to be leery about companies that purport to assist with the application process in return for a percentage of the amount recovered. These kinds of companies are the pariah of the tax world and should be avoided at all costs. The better option is to either do it yourself or hire an accountant.

Related Article: Top Tax Credits for Canadians

Find out if you qualify

The bottom line is there is no harm to filing a T2201 Disability Tax Credit Certificate to see if you qualify. The worse that can happen is the CRA turns you down. On the other hand, if you do qualify, you may be in a position to save $1,600 to $2,500 per year, if you are a resident of Ontario, in addition to retroactive tax credit refunds going back up to 10 years. Besides that, being eligible for the disability tax credit may open the way to other federal and provincial/territorial programs such as the Registered Disability Savings Plan (RDSP), the working income tax benefit and the child disability benefit.

Written by Nancy Grouni

Nancy is one Canada’s approximately 150 advice-only, fee-only Certified Financial Planners (CFPs). She does not sell any products or receive any referral fees. She has a particular interest in financial planning for seniors and their adult children but works with single people, seniors and families at all planning stages seeking to take control of their financial lives. Nancy is a Certified Financial Planner at Objective Financial Partners in Toronto and works via Skype with clients across Canada.

22 Responses to Disability Tax Credit: Are you missing out on this misunderstood tax credit?

  1. Hi Nancy – good article. Can you please comment on how a parent will use the DTC for an dependent that is living at home and is over the age of 18? What can a parent claim on their tax return as a tax credit?

    • Thank you, Derrick. Per the 2017 Federal Budget, the new Canada caregiver tax credit replaces the infirm dependant tax credit effective 2017 onward. $6,883 may be claimed for the care of an infirm dependant relative such as an adult child, and $2,150 for an infirm dependent for whom the eligible dependent credit is claimed. Please note that the credit amount is reduced when a dependent’s net income exceeds $16,163. As always please consult with your accountant regarding tax planning matters

      • So if conditions are met, it may be possible for you to claim both CCC mentioned in my comment above, as well as the DTC. The DTC is claimable to the extent the dependent doesn’t need the full DTC claim themselves. The remaining DTC not used can be transferred to a supporting person. The math involved is disability amount – adjusted taxable income = maximum amount available for transfer. Hope this helps, Derrick!

  2. Thanks, Nancy.

    I am becoming eligible for this tax credit as my hearing is becoming more and more impaired.

    I was not aware of this type of credit for hearing issues.

  3. At least ten years ago the Supreme Court ruled that FM/ME was an acceptable disability for purposes of the DTC. Please make certain patients and Medical personnel are aware of this change.

  4. As a retired family physician I must let you know that these forms are a source of great frustration. They are very involved and can take up to an hour to properly complete. Therefore the patient should be prepared to pay a large amount, even tho they will be turned down !
    Why ? Because the disability must be severe and prolonged. You do not want to be able to qualify ! Despite what your accountant says .

  5. I applied for the disability tax credit a couple of years ago and in the end I came out $18000 ahead.
    Yes a cheque for 18000.00
    I used one of the services that help you orchestrate the whole thing and yes there is a commission involved but I don’t think I would have been successful if I didn’t.
    Dealing with complicated forms ,uncooperative doctors and such.
    I have suffered from MS for 25 years and I continued to work up until I was 62.If you want to sell your house do you go at it your self or get a professional If you have investments do you go at it alone or get help from an advisor.Same with legal stuff. Go at it alone or get a Lawyer.My advise to those that choose to pursue the disability tax credit is talk to the people who specialise in orchestrating the whole thing.
    Worked for me
    Yes it cost a few bucks but everyone has to eat in the end

    • My sister sent 60 pages of docs including the signed form for her disabled adult son to CRA. She has a postal receipt that they received them and they acknowledge receipt but say they lost them all in a move from Surrey BC…. to Winnipeg. They said they would get back to her but of course never did.

  6. As a physician, I find your comments frustrating. It is a simple matter for you to simply say get the form filled out and see if you qualify. I’m also not sure what the point is of asking your accountant if you qualify. In my experience most non physicians will simply refer the patient to their practitioner to try and get the form filled out regardless of whether they actually do qualify or not. Ultimately it is not CRA that decides but the physician or practitioner that fills out the form. If a patient presents with the form and does not qualify, I will not fill it out. Most patients and accountants do not understand what a severe disability that interferes with basic activities of daily living involves. Unfortunately most patience and accountants are misguided in what they feel qualifies for disability. I have no problems feeling this form out for somebody who truly deserves it. Most that present to my office with it do not. Those that feel physicians are being difficult are simply unfortunately individuals who have a false sense of entitlement.

  7. My friend has Wet Macular Degeneration – very poor and worsening vision, and as a result of this article I will suggest this to her.

    I also went to the CRA site and it sets out the definition – specs of what is a vison disability. She is seeing a specialist and gets shots in her eyes, but I see from the CRA site that for vision – an optometrist is also qualified to sign these forms.

    Several years ago my mother-in-law developed dementia and was in care. We got the form signed by her doctor and it was accepted by CRA. Important to note that once accepted you do not have to reapply.

    • I’m glad you are able to help your friend and also mother in law. Nurse practitioners are now also able to certify form T2201 as per the 2017 Federal Budget. Thank you for sharing your experiences, Dave.

  8. Please be assured that the intent of the article was not to frustrate physicians or to oversimplify the DTC application process. Rather the intention was to raise awareness that this credit exists for those with a severe and prolonged physical or mental impairment. The article also stated that each scenario is reviewed on a case by case basis. Thank you for sharing your thoughts, Bobby.

  9. In my opinion my husband definitely qualifies for this tax credit. I had the GP complete the forms today. My question is, what address do I send the completed T2201 to? We reside in Ottawa.

  10. Sounds good, Jackie. As a matter of fact, there have been some recent tax office adjustments and residents of Ottawa are now to send their form to the Sudbury office, (formerly it was the Quebec tax centre). The address is: Sudbury Tax Centre, P.O. Box 20000, Station A, Sudbury ON P3A 5C1.

  11. Once qualified, you do not need to reapply from scratch but you do have to have a form filled out and signed by the practitioner every 5 years to confirm the disability still exists.

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