Many Canadians face the prospect of disability, either now or in the future. The fear of losing the ability to support their families, plan for their retirement, and achieve their life goals can be overwhelming. They often ask, “how does the disability tax credit work?” and “Can it help me stay at work and live my life?”
Any Canadian who suffers a long-term disability should learn more about the Disability Tax Credit and determine whether they are eligible for money back on their next year’s taxes. They might be eligible for tax credits from previous years as well.
Table of Contents
- What Is the Disability Tax Credit?
- Why Is the Disability Tax Credit Important?
- Employment and Support for People with Disabilities
- What Are the Eligibility Requirements for a Disability Tax Credit?
- How Do I Apply for a Disability Tax Credit?
- What Is the Role of a Medical Professional in Applying for a Disability Tax Credit?
- How Large is the Disability Tax Credit?
- Are Disability Tax Credits Retroactive?
- What If I Am Taking Care of a Person with a Disability?
- What Can I Do If the CRA Denies My Request for a Disability Tax Credit?
- Are There Other Sources of Assistance for People with Disabilities in Canada?
- The Importance of Disability Insurance
What Is the Disability Tax Credit?
The Canada Revenue Agency (CRA) introduced the Disability Tax Credit (DTC) in 1988 to replace more restrictive definitions of disability in the tax code. This tax credit reduces taxable income to offset the costs associated with having or caring for someone who has a disability.
To qualify for this tax credit, the taxpayer, their spouse, or their dependent must have a medical practitioner’s approval that they meet the eligibility criteria, which can include difficulty walking, eating, or speaking. For more information about the history of the Disability Tax Credit and its importance to Canadian Society, visit the Government of Canada’s website.
Why Is the Disability Tax Credit Important?
The Disability Tax Credit is a crucial lifeline for people with disabilities. Many people believe that because they do not have a disability, they do not have to learn about assistance for people with disabilities. The Disability Tax Credit is relevant to the lives of millions of Canadians and immigrants to Canada who pay Canadian taxes.
The Disability Tax Credit offers support for families with dependents who have disabilities. Young, healthy individuals can develop chronic, disabling conditions and require long-term medical care. This rise of COVID-19 has left many younger Canadians with long-haul COVID symptoms, including fatigue, respiratory, and cardiac problems.
An older relative might develop Parkinson’s, Alzheimer’s, or other debilitating conditions and need daily round-the-clock support.
The birth of a child with a disability might cause a family to redesign their home and cope with years of medical treatments and specialized education.
Disability can often occur without warning. In the wake of an accident, medical diagnosis, or childbirth, families often do not have the time to research their rights and available resources. The time to know and understand disability rights is before a crisis hits.
Employment and Support for People with Disabilities
Employers play a vital role in promoting awareness about the Disability Tax Credit and other forms of assistance to people with disabilities.
Supporting employees is crucial for maintaining an inclusive Canadian society and supportive workplace culture. The Disability Tax Credit is one pillar of that support. It protects employers from negative social and financial consequences when an employee struggles with a disability, such as:
- Low workplace morale
- Workplace safety risks as a result of untreated mental, physical or neurological illness
- Workplace security risks from employees facing mounting medical costs
- Stigmatization of people with disabilities in the workplace
People with disabilities have a better chance of continuing their careers and living independently if they have support from their employers as the federal and provincial governments.
What Are the Eligibility Requirements for a Disability Tax Credit?
Before claimants apply for a Disability Tax Credit, they must document that they have a condition that markedly limits their ability to function. Citizens with limitations in more than one ability might be eligible if the disabilities together constitute a marked limitation.
A variety of conditions, physical, mental, and neurological, can impair someone’s ability to carry out everyday tasks and pursue their career. Many conditions qualify citizens for disability assistance as long as they result in a marked reduction in the ability to carry out tasks that they need for daily life.
The disability amount can be difficult to quantify, but it should be present for at least 90% of the time, even if the disabled person receives help from medication and assistive devices. The disability should introduce a marked limitation, such as taking 15 minutes instead of five minutes to get dressed in the morning.
The Canadian government works to make the country’s cities and transportation infrastructure accessible to residents who use wheelchairs, walkers, and other mobility devices. The Disability Tax Credit helps people with limited mobility afford increased transportation and travel costs. People who lose the ability to walk may need to redesign their homes to retain their independence.
Difficulty with Eating or Drinking
Many neuromuscular, gastrointestinal, or dental conditions can interfere with normal eating and drinking. These conditions might limit the person’s ability to travel and force the person to rely on supplemental nutrition, intravenous fluids, or the use of a feeding tube. Depending on substantial support for nutrition limits the ability to work outside the home.
Mental Disorders or Cognitive Impairment
Conditions that limit mental functions can sharply limit someone’s ability to work and support a family. The conditions that affect mental and cognitive function include:
- Traumatic brain injury
- Anxiety Disorders
- Clinical Depression
A person who experienced clinical depression for over a year can qualify for the Disability Tax Credit as long as the effects significantly interfere with their life. Depression can cause debilitating physical and behavioural changes.
Urinary or Bowel Incontinence
Incontinence interferes with the ability to travel, socialize, and work in many fields. Incontinence supplies also constitute a significant additional medical expense.
A speech impairment resulting from aphasia, jaw trauma, nerve damage, and many other causes can severely impact the ability to perform many types of jobs and to communicate with others in daily life. It can significantly impact mental health and the level of social support as well.
Vision or Hearing Impairment
Governments worldwide have long recognized vision and hearing impairment as conditions that make daily life more difficult for many citizens. The Disability Tax Credit can help people afford assistive technologies and provide support while they train for a new career, learn to sign, learn Braille and develop other life skills.
Limited Use of Hands
Loss or damage of a hand or arm could cause difficulty with daily activities such as dressing. It is also essential for office work, physical work in many trades, and activities such as cooking and housecleaning.
Receiving Life-Sustaining Treatments
Some treatments, such as dialysis or insulin monitoring for diabetes, impose a cost in time and resources on people with chronic conditions. A person who receives life-saving medical treatments that significantly impact their ability to receive treatment might be eligible for the Disability Tax Credit.
How Do I Apply for a Disability Tax Credit?
How does the Disability Tax Credit work in practical terms? Once the CRA receives an application, it will decide eligibility within the next two months and respond with a statement of whether the claimant is eligible for the Disability Tax Credit. If the claimant is eligible, the CRA will state how many tax years they can claim the credit.
The form that claimants fill out to obtain the credit is the T2201 Disability Tax Certificate. It contains two parts. The claimant fills out the first part, and medical professionals fill out the second part of the form.
Claimants can submit the form online using the CRA website or mail a physical application. After a claimant receives approval from the CTA, they can claim the credit on their tax return. The credit can reduce the total amount of income tax they pay or entitle them to a refund from the Canada Revenue Agency for previous tax years.
What Is the Role of a Medical Professional in Applying for a Disability Tax Credit?
As part of the application, the claimant must submit documentation from a medical professional who can evaluate the claimant’s condition and attest to the impact that the disability has on the claimant’s ability to function.
The medical practitioners who certify that a person has a qualifying disability should practice in a field related to the condition they are evaluating. For instance, an ophthalmologist should evaluate cases of visual impairment, and a speech-language pathologist should evaluate speech impediments.
The types of medical professionals that might provide their evaluations to support a T2201 claim include:
- General practitioners
- Speech-language pathologists
- Among others
If someone has multiple disabilities or a single medical condition that affects multiple aspects of life (such as diabetes causing vision problems and limited mobility), they might need support from more than one medical professional.
The paperwork for the Disability Tax Credit requires medical professionals to answer detailed questions about the nature of the claimant’s disability. It might be more efficient to have the claimant’s primary care physician attest to the various symptoms rather than having multiple medical appointments to fill out a single form.
How Large is the Disability Tax Credit?
The tax credit changes yearly. The federal tax credit for 2021, according to the Government of Canada website, is $8,662 for adults and $13,715 for claimants aged 17 years or younger. Claimants who anticipate being eligible for the Disability Tax Credit in 2022 should consider that the value of the credit could change next year.
Are Disability Tax Credits Retroactive?
Canadians can apply for disability tax credits going back up to ten years if they live with a disability that impacted their lives in prior tax years. Claimants who recently became aware of the Disability Tax Credit should consider when they became disabled and whether they suffered prolonged impairment in the past due to their condition.
What If I Am Taking Care of a Person with a Disability?
How does the Disability Tax Credit work if the claimant is not the person with a disability? In many cases, a family member, spouse, or other companion takes care of the physical and psychological needs of a person with a disability. In these cases, the caretaker can claim some or all of the Disability Tax Credit.
Note that the line on the tax return where the claimant reports the credit is different if the claimant is:
(a) the spouse or partner of the person with the disability
(b) if the disabled person is a dependent of the claimant (such as a child)
Claimants can split the Disability Tax Credit between more than one recipient.
What Can I Do If the CRA Denies My Request for a Disability Tax Credit?
Claimants for a Disability Tax Credit who do not receive a favourable response have several options. They can:
- appeal the decision
- submit new documentation
- request a review of the decision.
Representatives of the Canada Revenue Agency are available to clarify the reasons for their decisions and answer questions about the process.
Are There Other Sources of Assistance for People with Disabilities in Canada?
Federal and provincial programs offer other forms of assistance to Canadians with disabilities, particularly those who have low incomes. See this publication for more information from the Government of Canada on benefits for people with disabilities, including
- Access resources like to Braille books and TTY connections
- Assistance finding a job with the Canada Job Bank
- Employment insurance for people who lost their job after they became disabled
- Help with accessibility at home in the workplace
- A gas tax refund if the claimant cannot use public transportation
- Disability assistance for veterans
Non-Governmental Organizations might offer grants, loans, and other sources of financial assistance. Businesses might offer low-cost or pro bono work for people with disabilities in the local community. Contact the Government of Canada for more information about organizations in the area that support people with disabilities.
The Importance of Disability Insurance
How does the disability tax credit work in conjunction with private insurance? Canadian residents should have disability insurance to supplement government assistance in the event of an injury or medical condition. Many employees depend on disability insurance as part of their company’s benefits package. Disability insurance covers medical costs, lost income, and other expenses associated with a disability.
Disability insurance can cover as much as 85% of a policy holder’s income so they can maintain their quality of life during a temporary disability or adjust to a long-term disability. Employees can devote more energy to their work when they know that their disability benefits provide them and their families with security if they cannot work.
Our blog article will help you learn tips of how to save money on tax in Canada.
Where Can I Find Information About Disability Insurance Group Rates?
Many Canadian companies provide private disability insurance and health insurance, life insurance, and other benefits. The security of a comprehensive benefits package frees up employees to devote their full attention to work while on the job and confidence in their daily lives. Giving employees health and disability coverage options can be key to effective recruitment and retention.
Group Enroll provides disability insurance quotes and quotes for health insurance rates from the premier insurance providers in Canada. We make it easy to set up and administer group insurance plans that meet the specific needs of your business and your employees.
How does the Disability Tax Credit work? We will be happy to answer your questions. To receive quotes from Canada’s top insurance providers, simply fill out our online quote form. Or, you can get in touch with Group Enroll by sending an e-mail to [email protected] or addressing physical correspondence to 10 Great Gulf Drive, Unit 5, Vaughan, ON, L4K 0K7.