The Canadian income tax system provides for a number of important benefits and deductions for people with disabilities and their families.
Each year, the Canada Revenue Agency produces and updates a guide entitled Medical and Disability Related Information (CRA document number RC 4064). People can usually get this guide at their local Canada Revenue Agency Office or from the agency’s Internet site – http://www.cra-arc.gc.ca (click on “Forms and Publications” on the left margin, then select “Client Group” under “Listed By” and then on “Persons with Disabilities”). The guide is also available in alternate formats for people who require Braille, large print, e-text, or audiocassette.
The benefits, tax credits and deductions include a number of important features that primarily help to reduce the amount of income tax paid by persons with disabilities and/or their families. Some of the current benefits, credits and deductions include:
Tax Credits and Deductions
Disability Tax Credit (line 316 of the federal return and line 5844 of the New Brunswick return). This is a “non-refundable” tax credit that helps to reduce the amount of tax paid by people who have a disability. Non refundable means that it only has value if it is able to reduce the taxes a person owes. The DTC is available for a person of any age who meets the eligibility criteria. A person is eligible for the Disability Tax Credit (DTC) if they have a “severe and prolonged physical or mental impairment” that causes the person to be “markedly restricted” in a basic activity of daily living. A Disability Tax Credit must be applied for using the T2201 application form (available on line at www.cra.gc.ca/forms or by calling 1-800-959-2221). The DTC application form has 2 parts:
Part A is personal information that is filled out by the applicant or his or her representative;
Part B must be filled out by a “qualified practitioner” (medical doctor, optometrist, audiologist, psychologist, etc.) who certifies the effects of the person’s disability.
Not every person with a disability will be eligible to receive the DTC. It will depend on the nature of the person’s disability and sometimes on the quality of the information provided by medical people who are asked to certify the person’s disability. Some people who have been denied the DTC have had success when they have reapplied using a different doctor to fill out Part B of the form.
Note: Some doctors or other medical professionals may not be willing to sign the application form for the DTC. In this case, you may need to ask for a second opinion to have the application form completed.
Once the Disability Certificate is obtained from the Canada Revenue Agency, it continues to be valid for subsequent tax years until the person’s condition changes. It is not necessary to obtain a new DTC each year, unless the CRA requests this.
Helpful tip: If your child is eligible for the Disability Tax Credit but does not have enough income to use it, a parent or caregiver may be able to claim it instead to reduce his or her income. See the information below on the Transfer of the Disability Tax Credit.
Disability Tax Credit Supplement for Children (line 316 of your federal T-1 form and line 5844 of your New Brunswick return). If your child is under 18 at the end of the year and qualifies for the Disability Tax Credit, you can claim an additional amount for the tax credit. This credit “supplement” may be reduced if someone claims child care expenses or attendant care expenses (as a medical expense – see below, or as a deduction on line 215).
Transfer of the Disability Tax Credit (line 318 of your federal return and line 5848 of your New Brunswick return). If your child is eligible for the DTC but does not have enough income to use it, the credit can be transferred to a caregiver. When you can claim an amount for a dependent adult or child on lines 305, 306 or 315 of the federal tax form, then your child can transfer the DTC to you. This includes any DTC Supplement for Children as discussed above. This can result is significant tax savings for families.
Medical Expense Tax Credit The is also a non-refundable credit that you are able to claim for medical expenses that you have paid for your child or another relative who is dependent on you for support. You are able to claim for the full amount of medical expenses you paid less any amount for which have been reimbursed (for example from a private insurance company. This credit covers a variety of expenses that people with disabilities or their families may incur, including attendant care expenses, voice recognition software, food for special diets, sign language interpreters, payments for vehicle adaptations, special equipment, and travel costs to access specialized medical care. For a full list of eligible medial expenses see the Medical and Disability Related Information guide available from the Canada Revenue Agency.
Infirm Dependent Tax Credit (line 306 of your federal T-1 form and line 5820 of your New Brunswick tax form). This is another non-refundable tax credit. It applies if your adult child with a disability (18 or over) is living in your home and is dependent on you for support. If you or another person is claiming the Caregiver Tax Credit for your child (line 315) then you will not be able to claim this credit.
Caregiver Tax Credit (line 315 of your federal T-1 form and line 5840 of your New Brunswick tax form). You can claim this non-refundable tax credit if your child is 18 or over and you are his or her primary care giver. Your tax package contains federal and provincial “worksheets” that you can use to find out how much you can claim.
Child Care Expenses Deduction (line 214 of your federal tax form). This is a deduction rather than a credit meaning that whatever you can claim reduces the amount of income on which you have to pay tax. You can claim expenses for childcare you paid to work, go to school, run a business or do research. There are special provisions for child care expenses for children who have a disability. You need to calculate your amount using the federal form T778.
Disability Supports Deduction (line 215 of your federal tax form). This deduction allows people with disabilities to claim expenses for personal attendant care and other disability supports expenses that were used to go to school or work. However, the person cannot claim this deduction if he or she or someone else (such as a parent) claims these expenses as medical expenses for the Medical Expense Tax Credit.
Tax Benefits provide direct payments from the federal government to families who have children who are younger. They generally are given to people who apply and qualify and who have filled out their income tax forms.
Universal Child Care Benefit. This is a “universal” benefit which means that your eligibility to receive it does not depend on how much money you earn. It pays $100 per month for every child you have under the age of 6. You do not to apply for the benefit if you are already receive the Canada Child Tax Benefit or have already applied for the Canada Child Tax Benefit. Otherwise you have to apply to receive using the federal government form RC66.
Canada Child Tax Benefit. This benefit provides a monthly cheque to families who have children under 18 years of age. The amount that you receive will depend on your family’s net income from the previous year. In order to receive this benefit you and your spouse have to file an income tax return. To apply for this benefit you need to fill out form RC66 that you can get by calling the Canada Revenue Agency or from the CRA web-site http://www.cra.gc.ca/forms.
Child Disability Benefit. In addition to the Canada Child Tax Benefit (CCTB) you may also be able to receive the Child Disability Benefit. This will be paid as a supplement to the CCTB if your child who has a disability is eligible to receive the Disability Tax Credit.
The income tax system can be complicated. If you are unsure of what kind of benefits, credits, or deductions that you or your child may qualify for, talk to a counsellor at the Canada Revenue Agency or an accountant who assists people in the preparation of income tax returns