Michael Ford
Estates & Wills & Trusts

Are you eligible for the disability tax credit?

Canadians who qualify for the disability tax credit, but haven’t applied for it may be eligible to recover up to $16,000 in back credits, says Ottawa disabilities and estate planning lawyer Kenneth Pope.

Tax credits are often overlooked as a vehicle to help people with mental and physical impairments — and their families — lower their taxable income, he tells AdvocateDaily.com.

“The filing process can be onerous because it requires a statement from a medical professional and sometimes there is a disconnect between how physicians complete forms and how the CRA civil servants process applications,” Pope explains.

The tax credit reduces the amount of income tax people with a disability — or people supporting them — have to pay the Canada Revenue Agency.

“As a person with a disability, if you qualify, you can claim the disability amount on your tax return,” says Pope, principal of Kenneth C. Pope Law. “Or your spouse or another supporting person may also be able to claim part of the amount that you don’t need to reduce your federal income tax to zero.”

Any portion of the tax credit that isn’t used by the disabled family member can be transferred to a parent or sibling, as long as they are helping out with expenses in the areas of food, clothing and shelter, says Pope.

“Let’s say your brother is living in a long-term care home where most of his needs are taken care of,” he says. “Perhaps you maintain a bedroom for him in the family home or you buy food or clothes for him as required – that would be sufficient to qualify. The point is the credit is available for helping out families in these circumstances.”

To qualify, a person must be “markedly restricted” and have a “severe and prolonged impairment” that has existed for at least 12 months, Pope points out.

“Just because they’re receiving provincial disability benefits, doesn’t necessarily mean they qualify for the disability credit; it's a separate application process,” he explains.

Beyond helping to lower taxes, qualifying for a disability tax credit is also step one in accessing other money-saving vehicles available from the government such as the Registered Disability Savings Plan, says Pope.

“The RDSP is designed to help parents and others save for the long-term financial security of a person who is disabled and has already qualified for a disability tax credit (DTC),” he says.

The RDSP is especially valuable for disabled people under the age of 49, as the federal government triples the annual contribution made by the recipient, Pope adds.

“So if you set this up at age 18 and contribute $1,500 a year, the government contributes $4,500,” he says. “If you invest that at a rate of return of five per cent, it will be worth about $500,000 when the person turns 60.” 

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