How does the disability tax credit work?

By: Updated: March 18, 2022

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People with disabilities face costs that other taxpayers don’t, such as attendant care, special devices and computer software. In addition, they are more likely to be able to work only part-time or be unemployed.

The Canadian government offers a number of tools to assist them financially. Some of these benefits can be claimed by the parents of a disabled person.

 

What is the disability tax credit?

This is a non-refundable tax credit for the disabled or those who are supporting a disabled person. The disability tax credit 2021 is $8,662. The maximum supplement for those supporting a disabled person under the age of 18 is $5,053.

 

How does the disability tax credit work?

It allows you to claim the disability amount on your tax return. It’s a non-refundable tax credit that helps to reduce your taxable income. It can cut your taxes owing to zero if your income is low. However, it is “non-refundable”, which means that if your taxable income is negative you will not receive a tax refund based on the disability tax credit.

 

Who is eligible for the disability tax credit?

The disability tax credit does not speak to specific medical conditions. Instead, it is based on impairment of physical or mental abilities that is severe and prolonged, and that have resulted in marked restrictions on a person’s ability to work and lead a normal life.

Some of these conditions include:

  • Vision
  • Speaking
  • Hearing
  • Eliminating (bowel control)
  • Feeding
  • Dressing
  • Mental function for everyday life
  • Life-sustaining therapy

For example, a life-sustaining therapy could be testing and ongoing insulin treatment that takes 14 hours or more a week. However, if you have diabetes and manage your symptoms through diet this would not qualify as a disability because it does not prohibit you from doing everyday activities.

What’s the definition of prolonged? Typically, this is seen as a minimum of 12 months. If the disability continues after that time, it would be an ongoing disability and the person would be eligible for the tax credit.

What’s considered severe? It means that someone with a disability takes an inordinate amount of time to accomplish a task (typically three times as long). It should also have an impact 90 percent of the time.

 

Steps to claiming the disability tax credit

The first step is to complete a self-assessment questionnaire. This will guide you in determining whether you could be eligible for the credit.

If you think you qualify, you can ask a medical practitioner to fill out the Disability Tax Credit Certificate. This is a 16-page document that covers all of the conditions mentioned above.

However, submitting a certificate does not guarantee that the Canada Revenue Agency will automatically let you claim the tax credit. They will make this determination.

In addition, the fact that you receive payments for other disability programs does not mean you will automatically qualify for the tax credit. This applies to the Canada Pension Plan disability benefit, workers’ compensation and private disability insurance. These programs may have different disability criteria than those set out by the CRA.

 

Can you claim a retroactive CRA disability tax credit?

Yes! If you did not claim this credit in past years, you can apply for it retroactively. You can claim up to 10 years. However, the CRA may request a medical practitioner’s certificate for these retroactive claims.

 

How much do you get back from the disability tax credit?

As we have indicated, the disability tax credit is $8,662. It is non-refundable so you do not receive a refund if your taxable income is negative.

 

How is the disability tax credit calculated?

The Canada Revenue Agency determines whether you qualify for the tax credit. If you do, you can claim the full credit when you file your tax return.

 

Is the disability tax credit a monthly payment?

No. You can claim the non-refundable credit when you file your tax return.

 

Other supports for those with a disability

In addition to the disability tax credit, you may be eligible for other benefits, including:

  • The disability supports deduction: You can claim expenses that allow you to go to school or work. These could include an attendant to care for you, special software for your vision and tutoring services.
  • Medical expenses: You can claim prescription drugs and devices to help you manage your disability. However, you can’t submit receipts for these expenses if you have already claimed them under the disability supports deduction.
  • Registered Disability Savings Plan: This is a savings plan to help the parents of a disabled child or adult to ensure the long-term financial future of the disabled person. The plans may be eligible for grants and bonds from the government of Canada.
  • The child disability benefit: This is a tax-free monthly payment to families who have a child under the age of 18 who has a severe and prolonged impairment in physical or mental functioning. The current maximum benefit is $2,915 per year. The amount you receive is based on your family net income, with low-income earners receiving the maximum.

As you can see, the disability tax credit can be complicated. Simply having a disability does not necessarily mean that you can claim this credit on your tax return. It must have a prolonged and severe impact on your life. The best place to start is by using the Canada Revenue Agency self-assessment tool. This will give you a good idea about whether you are eligible.

In addition, be sure to check out the other benefits available to people with a disability. Even if you are not eligible for the disability tax credit, you may be able to claim medical and support expenses.

 

How to write off 100% of your medical expenses

Are you an incorporated business owner with no employees? Learn how to use a Health Spending Account to pay for your medical expenses through your corporation: 

Download the HSA Guide for Incorporated Individuals

Do you own a corporation with employees? Discover a tax deductible health and dental plan that has no premiums:

Download the HSA Guide for a Business with Staff

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