Question and Answers

Questions and Answers – Disability tax credit(s)

Published On October 19, 2013 | By Joseph (Ken) | Personal tax, Q&A

Question: I have a diabetes and two bad knees.  It is difficult for me to climb stairs and it’s a struggle to walk some days. A friend of mine told me I should apply for the disability tax credit. He showed me a website of a company who specializes in helping people apply for the disability tax credit.  They promise no upfront fees but will take 20% of my refund.  I’m not sure what to do.

Answer: Many people don’t realize that the disability tax credit applies to them. I have helped individuals apply for the credit for disabilities like autism, short-term memory issues, diabetes, limited mobility, speech and hearing just to name a few. As well, in addition to the FEDERAL “Disability Tax Credit (DTC)”, there is a BC PROVINCIAL “Fuel Tax Refund Program For Persons With Disabilities”.

Let’s look at the FEDERAL “Disability Tax Credit” first.

It is important to remember that the disability tax credit is a non-refundable tax credit (meaning it can only be used to reduce tax and will not result in a tax refund to you if you did not pay tax). That said, it is a transferable credit – meaning you can transfer it to your spouse or parent (if the individual with the disability is a minor or adult child), if you can’t use it.

It is also important to remember that this credit can be claimed for prior years, if the disability has been ongoing and you paid tax in prior years. This means that even if you (or your spouse) can’t use the credit this year, you can request an adjustment in prior years (up to 10 years under the CRA’s Taxpayer Relief Provision). Although you will need to file a T1 Adjustment for each year you wish to claim the disability tax credit, the savings can be significant.

Applying for the disability tax credit involves taking the form T2201 (Disability Tax Credit Certificate) to your applicable doctor (qualified practitioner) who has to “complete and certify that you have a severe and prolonged impairment and its effects.

SEVERE: You must be either “markedly restricted” by one impairment or “significantly restricted” by two or more impairments (which when combined result in you being “markedly restricted”).  What they mean by being markedly restricted is that all or substantially all of the time (at least 90% of the time), you take an inordinate amount of time to perform one or more of the basic activities of daily living (speaking, hearing, walking, elimination (bowel or bladder functions), feeding, dressing, mental functions necessary for everyday life).  

PROLONGED: An impairment is prolonged if it has lasted, or is expected to last, for a continuous period of at least 12 months.

Once your doctor has filled out the form, you submit the form to the Canada Revenue Agency (they must validate the certificate for you to be eligible for the disability tax credit). If the CRA validates the certificate, you can apply for the disability tax credit for the applicable years.

Please note, if the individual with the disability is a child under 18 years of age, he/she may also be eligible for the child disability benefit, which is an amount available under the Canada child tax benefit. You do not have to apply for this credit, once the disability tax credit is approved, the CRA will do the required adjustments to the child tax benefit.

Another tax credit available is the BC PROVINCIAL “Fuel Tax Refund Program For Persons With Disabilities”.  As per Bulletin MFT004, the provincial fuel tax credit is a $500 maximum credit for individuals above 16 who own or lease a vehicle and have a qualifying disability. The qualifying disabilities are related to difficulty in using public transportation. You will need to download Form FIN119 and get your doctor (or nurse) to fill out section B.

Lastly, you do not need to give up 20% of your refund. That is excessive. Please consider that the credit can be upwards of $1,500 per year in tax savings. If the company “helping you” with applying for the disability tax credit takes 20% of that, you are paying them $300 EACH YEAR when their involvement is minimal.  Filling out the T1 adjustment takes 15 minutes maximum and you and the doctor fill out the disability form.  Never use a % of refund service (that includes H&R Block and Liberty Tax!).

Your friend is right, it is definitely worth your time. Contact me and I will help you through the process. 

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About The Author

Joseph (Ken)
(Ken) is a Registered Public Accountant with over 25 years of public practice experience in the accounting profession. Ken specializes in accounting information systems, taxation and financial reporting.

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