What is Disability Tax Credit (DTC)?
We have been talking about Registered Disability Savings Plan (RDSP) for quite sometime. If you could still recall, in order to be eligible to setup a RDSP account, one must first qualified for the Disability Tax Credit (DTC).
The Disability Tax Credit is a non-refundable tax credit for Canadians who have prolonged physical or mental disability. On the Disability Tax Credit Certificate, “Prolonged” is defined as “An impairment is prolonged if it has lasted, or is expected to last, for a continuous period of at least 12 months”.
Here is a 3 minutes video from the CRA that talks about the Disability Tax Credit.
What Are The Benefits To Get The Disability Tax Credit Approved?
To lessen the financial stress for families with special needs, the DTC is designed to reduce the amount of income tax that the disabled person needs to pay to the government. However, in the case that the disabled person has very low income, this tax credit may be transferred to another person who is supporting him/her. Not only that, if the approval could be retroactive to earlier years, CRA will back-date and review all the tax returns for those period of time. In other words, you may be entitled to tax refunds from the preceding years. (Note that the farthest that could be retroactive is the later of 10 years or from the date of disability.)
Beside the eligibility to open up a RDSP account, getting the Disability Tax Credit approved also opens up the door to other disability assistance programs such as the Child Disability Benefits and Working Income Tax Benefit Disability Supplement.
Who Could Be Qualified For The Disability Tax Credit (DTC)?
I would suggest you to read through the Self-Assessment questionnaires on the application form first. This should give you a general idea what approval criteria they are looking for. Below are the Self-Assessment questionnaires:
- Has your impairment in physical or mental functions lasted, or is it expected to last, for a continuous period of at least 12 months?
- Are you blind?
- Do you receive life-sustaining therapy?
- Do the effects of your impairment cause you to be markedly restricted (defined on the previous page) all or substantially all of the time (at least 90% of the time) in one or more of the following basic activities of daily living, even with the appropriate therapy, medication, and devices?
- speaking
- hearing
- walking
- elimination (bowel or bladder functions)
- feeding
- dressing
- mental functions necessary for everyday life
Note that you do NOT have to answer yes to all the above questions in order to get approved. Instead of guessing whether you could get approved or not, my advice is to take immediate ACTION and really go through the application process!
4 Easy Steps To Apply For the Disability Tax Credit
1) First, download the T2201 application (also known as Disability Tax Credit Certificate) from the CRA website (http://www.cra-arc.gc.ca/E/pbg/tf/t2201/t2201-16e.pdf)
2) The application contains two parts. You are required to complete Part A, which contains general personal information such as your name, address, gender, date of birth.
3) Part B is to be filled out and signed by a “qualified practitioner“. In the application, qualified practitioner could be a medical doctor, occupational therapist, optometrist, audiologist, physiotherapist, psychologist and speech-language pathologist.
4) When everything has been filled out, simply mail that to your tax service center. Locate the one that service in your province or territory, their addresses could be found on the last page of the application.
Should I Hire An Agency To Apply For The Disability Tax Credit?
That really depends on how much do you want to get involved during the application process. Most of my clients did manage to DIY, and got their approval without too much hassle. However, if you are uncomfortable dealing with this alone, and nothing would really happen unless someone is doing that for you, then perhaps hiring a third party to assist you during the process is not a bad idea. Just keep in mind when choosing an agency to work for you, make sure you understand what kind of services that they are providing, what are their fee structures, and try to look for their customer reviews. I’m sure that could be found easily online nowadays.
Awhile ago, I had a discussion in an online forum for families with special needs. This is what I asked: “Can anyone share their experience in applying for the disability tax credit? I have clients who had used an agency before and also DIY during the entire process…After the disability tax credit is approved, did you have to go through extra documents (i.e.: tax filing) to get the tax refunds from the previous 10 years?” Below are the responses:
- Response #1: “Did it myself. Not terribly difficult if you follow the guidelines provided. But I guess it also,depends on how obvious it is that it’s a severe disability…”
- Response #2: “A free respite agency helped me. They were so helpful”
- Response #3: “yes. There is a separate document that you need to file (one per year) to revise your earlier years’ claims. Once you have the DTC approval, which they will see on your record, this is pretty straight-forward. You just add each year’s DTC amount referencing the DTC line on the income tax claim and send them all in. The DTC amount for each year can be found on the CRA website same as the form for revising previous years’ claims”
How Long Will The Approval Process Take?
Although it varies from case to case, most of my clients do get a response from the CRA within 6-8 weeks. To check the status of your application, you may call the Canada Revenue Agency at 1-800-959-8281. If it is difficult for you to communicate over the phone due to the disability, you may consider filling out a T1013 form to authorize another person to call on behalf of you. You could find more details about authorizing or cancelling a representative at :http://www.cra-arc.gc.ca/E/pbg/tf/t1013/README.html
What Should I Do After The Disability Tax Credit Is Approved?
Once you’re approved, you should receive a letter called “Notice of Determination” stating which specific years you are eligible for DTC. If there are years that the Disability Tax Credit could be retroactive, you should contact the CRA to request adjustments on your tax returns. This may bring you tax refunds from the preceding years. If there are other benefits that you believe you might be entitled to, (i.e. Child Disability Benefits), you should also contact those departments.
Where Could I Obtain More Details About The Disability Tax Credit?
You may visit the Canada Revenue Agency website for more details: (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/316/menu-eng.html) or give them a call at 1-800-959-8281. I just called them around 3:00pm today (Aug 11, 2014), their wait time wasn’t that long, and they were being very helpful too. Of course, I also welcome you to contact me, I’ll try my best to assist you.
What is the next step after the DTC? Click here to find out