Living with a disability? Explore your tax options
Sometimes tax season can feel a little like the movie Groundhog Day – I know I am going to experience similar events around the same time and occasionally a new problem gets thrown at me to keep it interesting.
Every year I find a new client who should be claiming the Disability Tax Credit (DTC) but is not. Some people just don’t know the credit is available, but more often they think it doesn’t apply to them.
According to a recent federal report, one in seven Canadians lives with a disability. But only 500,000 Canadians claimed the DTC in 2009.
The credit was created to help with some of the additional expenses of everyday living and medical equipment, and the credit is often overlooked because people don’t think they qualify.
But it is better to ask rather than assume it doesn’t apply to you.
A disability is a severe impairment that makes it extremely difficult or time-consuming to carry out basic activities of daily living, even if you are undergoing therapy and using appropriate devices and medications.
The impairment must last or be expected to last 12 months and severely restrict your ability to see, walk, speak, hear or perform personal care activities or seriously affect your mental capacity to manage your personal affairs.
The definition has been expanded to allow for the cumulative effect of multiple impairments that individually would not be severe enough to qualify.
For example, a taxpayer with multiple sclerosis who constantly experiences fatigue, depression and balance problems will probably now qualify.
You can’t just claim the DTC on your 2010 tax return. The Canada Revenue Agency provides an online questionnaire on its website that will help determine whether you qualify, or you can discuss your situation with a tax professional.
Your doctor needs to complete a T2201, a Disability Tax Credit Certificate. This is submitted to the CRA and it determines whether you can claim the credit. It is not an overly complicated process.
If you have overlooked this credit on past returns, the good news is you can be approved retroactively, which allows you to go back and claim the credit.
I have filed 10 years of adjustment forms for clients who didn’t think they qualified. The 2010 credit works out to about $7,239 in federal credits and $7,106 in provincial credits.
As well, if your disability is for a dependant under 18 years of age you can add an additional $4,223 federal and $4,145 provincial tax savings a year, so getting a decade’s worth of savings can add up to a nice cheque from the government.
On top of that if it is for a dependant under 18 you will get an additional $2,470 a year in Child Tax Benefit payments. The CRA will go back three years for those payments.
Because it is a non-refundable credit, it only works to reduce your tax payable. It’s not refunded if you don’t have any tax owing. If you don’t use the entire credit, you may be able to transfer it to someone else such as a spouse or parent.
And if you are looking after someone claiming the DTC, you may be able to claim the caregiver amount, though it may depend on the person’s income and whether you are living with him or her.
Applying for the DTC is a fairly straightforward process. If you use a third-party preparer who wants to charge a fee based on the amount of your refund, understand what you will be paying once your cheque arrives. It can be costly.
Preparing the DTC claim is a standard procedure and should not cost you significantly more than a regular adjustment.
The credit was designed to help offset every day expenses, and you shouldn’t pay thousands of dollars for the opportunity to claim it. Keep the money in your own pocket.
Tax Talk is a weekly column prepared by Doug Northrup, a tax professional, small business and corporate specialist and tax advisory member for H&R Block in Moncton. He can be reached by email at firstname.lastname@example.orgB