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Disability Tax Credit

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Filing Your Return
Disabilities -> Disability Amount Tax Credit
Income Tax Act s. 118.3

Line 316 Disability Amount Tax Credit

To qualify for this non-refundable tax credit, a form T2201 Disability Tax Credit Certificate must be completed, certified and submitted.  This form has sections on various types of physical or mental impairments.  Each section asks for the year in which the impairment began.  However, in order to have the disability tax credit applied retroactively, a form T1Adj must be filed for each previous tax year in which the person qualifies.  See our article on changing your tax return for how to do this, and the time periods for which it can be done.

The amount of this federal tax credit is $8,001 for 2016 ($7,899 for 2015), with a supplement of $4,667 for 2016 ($4,607 for 2015) for taxpayers under 18 years of age.  The supplement is reduced when total child care and attendant care expenses claimed for the taxpayer under 18 exceed a threshold of $2,734 for 2016 ($2,699 for 2015), and eliminated completely when those expenses exceed $7,401 for 2016 ($7,306 for 2015).  See the tables of non-refundable tax credits for the provincial amounts and tax rates of this tax credit.

The disability amount tax credit is claimed by completing the federal worksheet included in the personal income tax return, and entering the resulting amount on line 316 of Schedule 1.

If part or all of the disability amount tax credit cannot be used by the taxpayer, it can be transferred to a spouse or common law partner, or to a supporting taxpayer (e.g. parent, child).  See the Canada Revenue Agency (CRA) topic Line 318 - Disability amount transferred from a dependent.  A supporting taxpayer may also be able to claim the caregiver amount tax credit on line 315.

If a qualified person (usually a medical doctor) certifies that you have a severe and prolonged mental or physical impairment which markedly restricts the ability to perform a basic activity of daily living, then a disability amount may be claimed.  For 2005 and later years, eligibility for the disability amount tax credit includes persons with a severe and prolonged mental or physical impairment which significantly restricts the ability to perform more than one basic activity of daily living, including

bullet speaking
bullet hearing
bullet walking
bullet elimination (bowel or bladder functions)
bullet feeding
bullet dressing, or
bullet performing the mental functions necessary for everyday life

If the cumulative effect of the restrictions in performing activities is equivalent to having a single marked restriction in one activity, then the person will be eligible for the disability tax credit.

The term "markedly restricted" as defined by the Income Tax Act s. 118.4(1)(b):

"an individual's ability to perform a basic activity of daily living is markedly restricted only where all or substantially all of the time, even with therapy and the use of appropriate devices and medication, the individual is blind or is unable (or requires an inordinate amount of time) to perform a basic activity of daily living"

If you are under 18, an additional amount may be claimed.  This may be reduced by any child care or attendant care expenses that were claimed by you or a supporting person.  See the tables of non-refundable tax credits for tax credit amounts and income limitations, federally, and for each province and territory.

Life-Sustaining Therapy

Individuals receiving extensive therapy are eligible for the disability tax credit (DTC) if their therapy meets 3 conditions:

  1. it is essential to sustain a vital function of the individual,
  2. it is required to be administered at least 3 times each week for a total duration averaging not less than 14 hours a week, and
  3. it cannot reasonably be expected to be of significant benefit to persons who are not so impaired.

The following changes were made for 2005 and later years, to better define activities that are considered therapy, and will be considered as time spent receiving therapy:

- Where the therapy has been determined to require a regular dosage of medication that needs to be adjusted on a daily basis, the activities directly involved in determining the appropriate dosage will be considered part of the therapy.

- Therapy does not include activities such as following a dietary restriction or regime, exercise, travel time, medical appointments, shopping for medication or recuperation after therapy.

- The time it takes to administer the therapy must be time dedicated to the therapy—that is, the individual has to take time away from normal, everyday activities in order to receive the therapy. Further, in the case of a child who is unable to perform the activities related to the therapy as a result of his or her age, the time spent by the child’s primary caregivers (i.e. parents) performing and supervising these activities for the child can be considered time dedicated to the therapy.

With these changes, many children with Type I diabetes may be eligible for the DTC.

Disability Tax Credit Promoters Restrictions Act

Don't be misled by some companies which seem to indicate almost anyone is eligible for the disability tax credit.  If you actually are disabled, then you shouldn't have to pay someone a percentage of your tax credit in order to claim it, when all you need is a form completed by your doctor.  If you do decide to use a paid service to help you get the credit, make sure you ask them what happens if you are subsequently audited and have to repay the refund you received.  Make sure you get the answer in writing.

On May 29, 2014, Bill C-462 was passed and the Disability Tax Credit Promoters Restrictions Act was created.  This Act restricts the fees charged by promoters of the disability tax credit.  Promoters that accept or charge a fee exceeding the maximum fee will be charged penalties.  However, the Act is not yet in force (applicable).  The Coming Into Force section of the Act says "This Act comes in to force on a day to be fixed by order of the Governor in Council".  CRA held public consultations in November and December 2014 to obtain input from stakeholders about the maximum fee and who should be exempt from the reporting requirements.  The proposed Disability Tax Credit Promoters Restrictions Regulations are anticipated to be pre-published in Part 1 of the Canada Gazette in 2016, which will allow the chance to comment on the draft regulations before they are finalized.

See the CBC news article Tax Season 2015: The disability tax credit and the push for fee limits for more information.

CRA Resources

bulletIncome Tax Folio S1-F1-C2: Disability Tax Credit 
bulletExamples of impairments that qualify for the disability tax credit (DTC) This information describes qualifying impairments, in both text and video formats.

See also:

Persons with disabilities - links to all information on TaxTips.ca

Revised: September 25, 2016

 

 

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