What is Disability Tax Credit (DTC)
The Disability Tax Credit (DTC) created by the Canadian Government and Canada Revenue Agency (CRA) is a non-refundable tax credit intended to reduce the amount of income tax Canadians with disabilities and/or their families and supporters would have to pay annually hence assisting to offset some of the additional costs associated with having a severe and prolonged impairment in physical or mental functions.
The DTC also provides an extra credit/refund (supplement) if the person found eligible is under 18 years of age at the end of the year.
The tax credit is broken down into Provincial and Federal amounts, with the Federal portion being the same across the country and the Provincial percentage varying from Province to Province.
To be found eligible for DTC, you must experience difficulty performing activities of daily living such as walking, feeding yourself, hearing, speaking, or other debilitating conditions that affect day-to-day living.
How do Canadians Qualify for The Disability Tax Credit Program?
There are two different levels considered when qualifying for the DTC:
- the first is disabled, meaning that you cannot perform basic activities in your daily life,
- and the second is slowed, meaning you take a significant amount of time to perform basic activities in your everyday life.
Both disabled and slowed individuals can qualify for DTC, and both will receive the same level of benefits.
Many who consider themselves “slowed” never look into the DTC due to the perception that the benefit is only for those who are severely disabled. However, this is a misconception. Those who are slowed due to their impairments can also apply for DTC.
While the DTC provides more significant tax equity as well as assistance with disability costs that one may face, it does not in any way formally designate or label a person as disabled. The DTC was created to help impaired people who can still work and those who are too disabled to continue to work.
What Is the Disability Tax Credit Eligibility Criteria?
To be considered eligible for the Disability Tax Credit (DTC), you must:
1) Be a Canadian citizen or Permanent Resident of Canada.
2) Have a medical practitioner certify that you have a severe and prolonged impairment or marked restricted in 1 of the eligible disability categories.
3) Have a medical practitioner certify that you have significant limitations in 2 or more eligible disability categories.
4) Or receive life-sustaining therapy to support vital function.
The following eligible disability categories, according to the Canada Revenue Agency (CRA), are as follows:
- Walking
- Mental Functions (Mental Illness & Psychological Impairment)
- Dressing
- Feeding
- Eliminating (bowel or bladder functions)
- Hearing
- Speaking
- Vision
- The cumulative effect of significant limitations
- Life-sustaining Therapy
There are 3 MAIN impairment categories eligible for the Disability Tax Credit (DTC), each with its own set of conditions. These categories are as follows:
1) Physical Impairments – The CRA considers the following conditions as potentially eligible physical impairments for the Disability Tax Credit:
- Chronic pain
- Visual Disabilities
- Hearing Disabilities
- Elimination Disabilities
- Diabetes
2) Mental Illness and Psychological Impairments – The CRA considers the following conditions to be potentially eligible mental impairments for the DTC:
- Mood disorders (such as depression or bipolar disorder)
- Anxiety disorders
- Personality disorders
- Psychotic disorders (such as schizophrenia)
- Eating disorders
- Trauma-related disorders (such as post-traumatic stress disorder)
- Substance abuse disorders
3) Neurological Impairments – CRA considers the following conditions as potentially eligible neurological impairments for the Disability Tax Credit:
- Multiple sclerosis
- Alzheimer’s disease
- Parkinson’s disease
- Epilepsy
- Stroke
As previously mentioned, having a medical practitioner certify that you have an impairment that falls under one of the above impairment categories does not necessarily make you eligible for the DTC. Eligibility is based on the severity of the impairment and its impact on one’s ability to perform “Activities of Daily Living.”
List of Prolonged Impairments:
The following is a list of some of the more common conditions the CRA considers when marking one’s eligibility for the Disability Tax Credit:
- Osteoarthritis
- Digestion Disorders: Inflammatory Bowel Disorder, Colitis, Prostate Problems
- Limited Mobility Issues – Chronic Pain, Fibromyalgia, Arthritis, Spinal Stenosis, Ankylosing Spondylitis, Back and Neck Problems
- Breathing Disorders: COPD, Emphysema, Tuberculosis, Asthma
- Hearing Impairments
- Cognitive Impairments: Memory Loss, Dementia, Alzheimer’s, traumatic and acquired brain injury, Parkinson’s.
- Psychological Disorders: ADHD, Autism, Depression, Panic Disorder, Mood Disorders, Bipolar Disorder, Psychosis.
The significant eligibility changes in 2024 include:
- The addition of further criteria within the Mental Functions (Mental Illness and Psychological Impairments) category.
- The recognition of additional activities when determining the amount of time allocated for life-sustaining therapies.
- The required frequency for life-sustaining therapy has been reduced to a minimum of two times per week, instead of three.
- The inclusion of individuals with Type 1 diabetes as recipients of life-sustaining therapies.
How to Apply for Disability Tax Credit
The DTC application process is made to be relatively straightforward and accessible to all persons interested in applying. There are two ways to fill out Form T2201, Disability Tax Credit Certificate, to apply for the DTC; digital application, and manual completion of the PDF. Both of these need to be filled out, completed, and signed by the individual applying, and their medical practitioner, before being submitted to the CRA for further assessment.
Qualifying and getting approved for the DTC is not always a simple process. A large percentage of Canadians who apply each year have their applications denied by the CRA.
However, every person looking to apply is held to different circumstances. Therefore, we suggest that you consider one of the following routes for applying:
- Option 1: Completing the Disability Tax Credit Application on Your Own
- Option 2: Completing the Disability Tax Credit Application with the Help of a Professional Accountant
A key to understanding how the DTC application process works is to understand the differences between the disabled and the claimant.
What is the Difference Between the Disabled Person and the Claimant?
Understanding these roles is crucial for properly navigating the application process and ensuring that the appropriate tax relief is obtained.
In the context of the Disability Tax Credit (DTC) in Canada, the terms "disabled person" and "claimant" refer to different individuals with distinct roles and eligibility requirements. Here’s a detailed breakdown:
Disabled Person
- Definition: The disabled person is an individual who has a severe and prolonged impairment in physical or mental functions. This person is the one who is directly affected by the disability and whose condition meets the eligibility criteria for the DTC.
- Eligibility: The impairment must be certified by a qualified medical practitioner. The disabled person must be markedly restricted in at least one of the basic activities of daily living or be receiving life-sustaining therapy.
- Role: The disabled person is the primary subject of the Disability Tax Credit. The tax credit is calculated based on their disability and can provide financial relief by reducing their income tax liability.
Claimant
- Definition: The claimant is the individual who applies for the DTC on behalf of the disabled person. The claimant can be a disabled person or a supporting person such as a parent, spouse, common-law partner, or another family member.
- Eligibility: The claimant must be someone who supports the disabled person and may be entitled to transfer any unused portion of the credit from the disabled person to reduce their own tax liability.
- Role: If the disabled person does not have sufficient taxable income to use the entire DTC, the claimant can claim the unused portion to reduce their own taxes. The claimant is responsible for completing the application process, including submitting Form T2201 to the CRA and ensuring that the necessary medical certification is provided.
How Does the Disability Tax Credit Work?
The DTC is a refund on federal taxes paid by Canadian individuals with disabilities OR their supporters. i.e. if the disabled person or their supporter has paid or is paying federal taxes (usually above 20-25k income), they then can claim and receive a tax credit if approved for the Disability Tax Credit.
The CRA Methods for Refunding the Disability Tax Credit
1. Retroactive one-time refund –The CRA will evaluate your DTC application and see when you were diagnosed or how long you had the symptoms of the qualifying disabilities; they can approve you for the DTC for up to the past ten years. If you or your supporter have been paying federal taxes during those years, you will receive a lump sum payment as a refund for the years you were found eligible.
2. Annual refund –if you have been found eligible to receive the DTC, you will be able to claim the DTC refund annually when you prepare your taxes. But please be aware that most DTCs expire after a few years and will require you to re-apply.
How Long Does It Take to Process a Disability Tax Credit Application?
Regardless of the method used to complete your Disability Tax Credit Application, it will typically take between 3 to 6 months for the CRA to assess the application and determine if you’re eligible for the Disability Tax Credit (DTC). However, this time frame can vary depending on the time of year, processing center location, and the complexity of your impairment or application.
Furthermore, if your application is approved for previous years, your tax returns will have to be reassessed. As such, it may take 1-3 months or so to process your retroactive tax credits. On average, it will usually take 3 months to process a new application, but some can take up to a year.
Appealing the Denial of Your Disability Tax Credit Application
- You can call the CRA and request further clarification on your application @ 1-800-959-8281, between the hours of 9:00 a.m. and 5:00 p.m., Eastern Standard Time.
- You can write to the CRA requesting a review of your application. In such a case, you should also include any new or updated medical information from a medical practitioner who is familiar with your situation.
- You can appeal the CRA’s decision by raising a formal objection within 90 days of the CRA sending you a “notice of determination.”
- Or you can submit a “fresh” T2201 form with new information about your impairments and/or use a different medical practitioner with greater knowledge and understanding of your impairment and the DTC eligibility criteria.
Benefits of Applying for Disability Tax Credit in Canada
- The DTC can reduce the amount of income tax owed.
- It can be transferred to a spouse or a supporting family member if the individual with the disability does not have enough taxable income to use the credit.
- Eligibility for the DTC may also open the door to other federal, provincial, or territorial programs, such as the Registered Disability Savings Plan (RDSP).
- If approved for the DTC, you may also be eligible for other credits and benefits, such as the Child Disability Benefit (CDB) for children under 18 and the Working Income Tax Benefit (WITB) disability supplement.
Need More Help
Disability Tax Credit has served as a lifeline for countless Canadians grappling with disabilities. Despite its significance, many individuals and their healthcare providers still grapple with questions and barriers when it comes to fully harnessing its benefits. That’s where our expert team of accountants in Toronto steps in.
If you have any questions or concerns, you can always consult one of our qualified professional accountants. We’ve helped thousands of Canadians qualify for the Disability Tax Credit, even if they were previously denied. We Can Help You Too! Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.