How To Maximize Your Disability Tax Savings And Benefits?
To help you in getting most of the disability tax savings and benefits, when you do your tax filing this year, you may want to discuss with your accountant first whether you would be eligible for the tax credits, deductions or the benefits below.
Disability Support Deduction:
- A disability supports deduction is available to individuals with mental or physical impairments where certain expenses are incurred to allow the individual to go to school or earn income
- The disability amount is a non-refundable tax credit generally available to individuals with severe and prolonged physical or mental impairments
Medical Expense Credit:
- You are generally entitled to claim a tax credit for eligible medical expenses incurred for yourself, spouse and children age 17 or under. Expenses incurred for other related dependants (ie. adult children or grandchildren, parents, siblings, aunts, uncles, nieces and nephews) can also be claimed under certain conditions. In the case of spouses or common-law partners, either spouse can make the claim regardless of which spouse actually paid the expense.
Refundable Medical Expense Supplement:
- The medical expense supplement is a refundable tax credit, which means that you could receive a tax refund if the credit exceeds tax payable. The purpose of this credit is to provide a measure of relief for working individuals with low incomes and high medical expenses.
Tuition and Education Amount:
- The tuition and education amount is a non-refundable tax credit offered for eligible tuition fees and time spent in a qualifying educational program. While the tuition credit can generally be claimed by anyone in a qualifying program (ie. a program at the post-secondary level or, for individuals 16 or older, one that improves skills in an occupation), only disabled persons can claim a full-time education amount for part-time enrolment at a qualifying institution.
Child Care Expenses:
- A deduction against income is available for amounts paid to look after a child if the child was under 16 at some time during the year, and the expense was incurred so you (or your spouse or common-law partner) could earn income, go to school, or conduct research. However, the above age restriction does not apply if the child had a mental or physical infirmity
Tax Credits Available To Supporting Persons:
Amount for Eligible Dependent:
- The amount for eligible dependant is available if you have no spouse or common-law partner, and support a dependant who resides in your home. The amount can be claimed in respect of a child, grandchild, brother or sister, provided they are under the age of 18, or mentally or physically infirm
Amount for Infirm Dependants Age 18 or Older
- This credit is available if you support mentally or physically infirm dependants age 18 or older.
- The caregiver amount is a non-refundable credit available to taxpayers who maintain a dwelling where the taxpayer and an eligible dependant live. Eligible dependants include children, grandchildren, parents, grandparents, siblings, nieces, nephews, aunts and uncles provided they are residents of Canada. In addition, the dependant must be age 18 or older, have a mental or physical infirmity (or in the case of parents and grandparents, be age 65 or older), and have a net income of $16,988 or less (2005 amount).
Disability Amount Transferred From A Dependant
- If you live with disabled dependants, you may be able to claim a disability amount transferred from the dependant. To be eligible for the claim, the dependant must have lived in Canada, and depended on you for some or all of the basic necessities of life.
Amounts Transferred from a Spouse or Common Law Partner
- Amounts may be transferred from a spouse or common-law partner if the spouse/common-law partner was eligible for the credit(s), but did not have enough income to make full use of them.
Other Federal Benefits For Disabled Individuals
Child Disability Benefit
- The Child Disability Benefit (CDB) is a component of the Canada Child Tax Benefit (CCTB), and is a tax-free benefit paid to families with low or modest incomes and disabled children.
GST/HST Exempt Goods and Services
- There are a number of goods and services related to disabled persons that are not subject to the federal goods and services tax (GST) or the harmonized sales tax (HST) applicable in certain provinces.
Duty Free Import of Certain Goods to Canada
- Some goods specifically designed for use by people with disabilities can be brought into Canada free of duty charge. If these goods are purchased abroad, when declared on return to Canada, the goods may be designated as specifically for disabled persons and may qualify for exemption from duty
Home Buyer’s Plan
- Individuals wishing to withdraw amounts from their RRSP under the Home Buyers’ Plan (HBP) must generally be considered “first-time home buyers”. An exception to this rule exists in the case of disabled individuals.
Canada Pension Plan (CPP) Disability Benefit
- The CPP disability benefit is a monthly benefit generally available to disabled individuals who contributed to the Canada Pension Plan while working, but have since become unable to work at any job due to disability. The purpose of the benefit is to replace a portion of the recipient’s employment earnings provided contributions were made to the plan.
Miscellaneous Disability-Related Benefits
- Private disability benefits may be available if purchased privately or through an employer before disability occurs.
- Short-term benefits may also be available under the Employment Insurance (EI) program if you contributed to the EI program (which generally excludes self-employed persons), and are unable to work due to sickness or injury
One of the factors that determines the amount of government grants and bonds that will be given out to a Registered Disability Savings Plan (RDSP) is the family net income of the qualified individual. Therefore, it is important to do the tax filing every year.
- Disclaimer: Above details are for general understanding only, and not meant to provide any tax, legal or financial advice. Most of the above information are obtained from the Mackenzie’s guide “Making a Challenge Less Challenging”. They could be subjected to change, and they are not guaranteed to be error-free. Please consult your accountant or a financial professional before making any decision. Featured image courtesy stockimages/freedigitalphotos.net