The disability tax credit is a non-refundable tax credit used to reduce income tax payable on your return.
It functions much like the basic tax credit in that it will reduce the income tax payable on your return to zero, but if there is any excess, it will not be refunded to you.
However, you can transfer the excess to your spouse, common-law partner or another supporting person.
This tax credit should not be confused with the disability supplement that is available from the Canada Pension Plan.
Normally if you qualified for the Canada Pension supplement, then you should also qualify for this tax credit.
How do you know if you qualify for the credit?
In order to apply for the credit, you need to have some sort of impairment in physical or mental functions that is severe and prolonged which means that it is expected to last for at least 12 continuous months.
The Canada Revenue Agency defines two criteria. One is “markedly restricted,” which is defined as when you are unable (or if it takes you an incredible amount of time) to perform one or more of the basic activities of daily living such as speaking, hearing (even with a hearing aid), walking, feeding, dressing, mental functions necessary for daily life, elimination, or are blind even with corrective procedures.
The second criteria is “significantly restricted” which means that although you can still perform daily living functions, you are still substantially restricted.
Another criteria, if it applies, is whether or not you receive life-sustaining therapy. Life-sustaining therapy must meet two conditions.
The first is that you require it to support life even if it alleviates the symptoms. Some examples are chest physiotherapy for breathing or kidney dialysis.
The second condition is that you must dedicate time for this therapy that must be at least 3 times a week for an average of 14 hours a week which does not include recuperation or travel time.
This time must be outside of your regular activity.
After 2005, the definition was changed to include a regular dosage of medication for a child that would need to be adjusted on a daily basis whereby the activities related to determining the dosage are considered to be part of the therapy.
Examples would be monitoring blood glucose levels, preparing and administering the insulin, calibrating the necessary equipment and maintaining a log book.
If the child is unable to perform the therapy because of his or her age, the time spent by primary caregivers performing or supervising the activities related to the therapy is considered to be time dedicated to the therapy. What is not included are implanted devices such as a pacemaker, or a special diet and exercise program or carbohydrate calculation.
In order to qualify, you need to be ‘markedly restricted’ in one of the items listed as the basic activities of daily living, or you need to be ‘significantly restricted’ in two or more of the items listed as the basic activities of daily living.
The process is to obtain a copy of form T2201 from the Canada Revenue Agency or from your accountant.
This form is nine pages long. You need to fill out the first page and then take the form to your doctor who will fill out the relevant sections and certify the form on the last page.
Don’t forget to sign the first page. Then the form needs to be sent to the nearest tax centre.
The Canada Revenue Agency will review the form and within three weeks to three months, will send out a letter that will disclose the results of the review and if you qualified for the credit, how many years and which years you may deduct the credit for.
At this point, you can bring the letter into your accountant who will perform the necessary adjustments to any past tax returns filed, if applicable.
The doctor that signs the form must be a ‘qualified practitioner’ which is defined as a medical doctor, optometrist, audiologist, occupational therapist, physiotherapist, psychologist and speech-language pathologist.
The medical doctor is the only one who can certify any of the sections on the form. The other professionals can only certify their relevant section.
Unfortunately, there will probably be a fee for this service which cannot be deducted on your income tax.
Many persons who have suffered a stroke may have significant impairment of several of these areas and could take advantage of this tax credit. Seniors should also take advantage of the Pharmacare program and any BC Medical supplements.