When a client received a cheque last week for $10,300 after our suggestion to apply for the Disability Tax Credit, I was reminded it is time for us to review the rules and regulations governing the DTC application process. The second hint to me was an excellent article by Peter Manastyrski in Senior Scope newspaper on the same topic. Peter is a DTC consultant with A Step Beyond, who helps with applications.
In spite of previous reminders, I believe that there are still many people who qualify for the DTC but have never applied, and some who may have been wrongly denied.
The rules and the application form (T2201) are complicated. A person can be working full time and still qualify, while others could be collecting disability income from an insurance company and possibly not qualify.
There is no set list of physical impairments, conditions or diseases that qualify a person for the DTC. Instead, the CRA criterion is whether or not a condition, or several conditions together, markedly restricts (at least 90% of the time) or impairs the ability of a person to perform one or more basic functions of everyday life. Such condition(s) must have lasted, or be expected to last, at least 12 months.
The basic functions are walking, speaking, hearing, seeing, feeding, dressing, necessary mental functions or elimination.
If, even with medication, a condition meant that 90% of the time a person could not walk a city block at normal speed, dress or feed themselves, perform everyday mental tasks without taking an “inordinate amount of time” as defined by a qualified practitioner, could not hear or speak normally, or were significantly restricted in any of these activities, that person would have grounds for an application.
An example could be a person who can walk, but only slowly or a short distance, due to a physical ailment. Persistent incontinence could also be a qualifying condition, if it markedly restricts the ability to perform everyday functions.
A person can also qualify if they suffer from several relatively minor impairments which, when taken together, cause the person to take an inordinate amount of time (or be unable) to perform any of those recognized functions of everyday living.
Conditions that are generally managed by medication would not, alone, qualify a person for the DTC. However, when combined with other conditions, they may.
Requiring life-sustaining therapies, such as dialysis or chest physiotherapy to facilitate breathing, (provided they are needed at least three times per week for an average of at least 14 hours), can also qualify a person.
A “qualified practitioner” (medical doctor, optometrist, audiologist, occupational therapist, physiotherapist or speech-language pathologist) completes and signs the application form. It is important that they understand the process and criteria, and be prepared for additional questions from CRA following the application. As you can see, the definitions are not exactly the everyday meaning of “disabled.”
The practitioner also has to know they are doing the right thing, and that this tax credit is government policy, designed to help those with a legitimate need.
Your resources are CRA form T2201 - Disability Tax Credit Certificate, the Tax Guide on Line 316 – Disability Amount, the CRA website for Persons with Disabilities, www.cra-arc..gc.ca/disability/ , private consultants or tax information websites.
The DTC is a non-refundable tax credit. This means it can reduce your taxes to zero, but not below. It can reduce taxes by as much as $2,500 per year for the affected person or a supporting relative, and can also be claimed for as many as 10 tax years retroactively to the onset of the impairment (as certified by the practitioner), which can mean a very large tax refund.
So, think carefully about this.
By the way, happy spring! The financial services industry will be celebrating tonight at the tenth annual Winn$tock Battle of the Bands, raising another $100,000 for charity, this year for the Movement Centre. (Go to www.winnstock.ca to donate and help us make our goal.)
Kudos and congratulations to Yvonne Burman from Great West Life, for making this the best Winn$tock ever. (And we mean “ever”, don’t we, Howard?)
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIMis a financial planner and advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.