In our free CPA financial literacy webinar on October 12, Stefanie Ricchio will walk through applying for the Disability Tax Credit, the Registered Disability Savings Plan, and common tax deductions that may be options for families who have individuals living with a learning disability. Register for this webinar.
The Disability Tax Credit (DTC) is a non-refundable tax credit that helps people with impairments, or their supporting family member, reduce the amount of income tax they have to pay. However, for individuals living with learning disabilities, the application process can be challenging. For example, it can be more difficult to sufficiently document the impact that Dyslexia has on a person’s daily life, than a physical impairment. Since the tax credits available through DTC can be significant, it’s important for individuals living with learning disabilities, as well their caregivers, to be knowledgeable in how to successfully navigate the DTC application process.
"Getting a formal diagnosis and obtaining proper support can cost Canadian families tens of thousands of dollars. This financial burden is insurmountable for most families. The Disability Tax Credit may offer some assistance,” notes Alicia Smith, Executive Director, Dyslexia Canada. “Unfortunately, many families find that the impacts of dyslexia are misunderstood, making accessing the DTC almost impossible. It is crucial to explain that the impacts are not just limited to academics - but can have profound effects on an individual's daily living,"
DTC can offset an eligible individual’s taxes payable by approximately $3,000, depending on the province of residence, as provincial portions vary. The federal amount is $8,662 and the BC provincial amount is $8,083. The total is pooled into an individual’s total non-refundable tax credits. Due to the size of the DTC, it is strictly controlled by the CRA, making the application and subsequent maintenance quite complicated. Some notable hindrances can include not understanding the process, the credit value, or not having a medical practitioner qualified to attest on behalf of the diagnosed individual. In turn, these challenges deter many eligible individuals and/or their caregivers from applying.
There is also often a discrepancy between what many people interpret as a disability and how the CRA defines it. Understanding the CRA definition is a key component in being successful in the DTC application process, as the CRA requires more than a diagnosis to qualify for the DTC. The Government of Canada’s site has information on who is eligible; and a medical practitioner who meets the CRA’s requirements will also be able to determine eligibility.
To be successful in this process:
- Identify who the qualified medical practitioners are: The CRA is very specific about who can and cannot attest to the condition reported on the DTC Certificate (Form T2201). The Government of Canada’s site has information on which medical practitioners are qualified under the CRA requirements to certify individuals for the DTC.
- Understand the Daily Activities of Living that the CRA is assessing against: These include vision, speech, hearing, mental functions, walking, eliminating, feeding, and dressing. Your application must demonstrate impairments in one or more of these categories in comparison to an individual of the same age without the diagnosis
- Don’t hold back in your first application attempt: The turnaround time for the CRA to assess a completed T2201 can take months. Submit all relevant documents the first time around so that the CRA can have a thorough understanding of your case from the start without having to come back to you for additional information.
- Understand the CRA formula: An individual must prove through their qualified medical practitioner’s attestation that they meet the criteria of: being blind or significantly/markedly restricted in one or more of the daily activities mentioned; and the condition is prolonged; and the condition is present a minimum of 90% of the time. Failing to meet either of these 3 elements will lead to an unsuccessful application attempt.
Being successful in this process will take time and effort, so the more complete your application is, the higher the chances of success. The financial benefits of receiving the DTC can help you invest in further therapies and services, including offsetting the cost of caregivers.
In some cases, receiving the DTC can also open the door to other government programs such as the Registered Disability Savings Plan. Therefore, if you believe you can demonstrate that you meet the CRA criteria, prepare your documentation and meet with your qualified medical practitioner to get the process started soon.
Stefanie Ricchio, (a CPA, CGA, in Ontario), is a published author, professor, award-winning content writer, academic advisory member for CPA Canada, and owner of a consulting agency.
Consult a CPA for more details regarding the DTC and your tax filing.