What Can Persons with Disabilities Claim as A Deduction or Credit?

By Randall Orser | Personal Income Tax

medical_1000006214-120613intFor someone with a disability or for those caring for someone with one, the government has many different kinds of credits and deductions available. Those are:

  • Disability tax credit
  • Medical expenses
  • Disability supports deduction
  • Child disability benefit
  • Registered disability savings plan

Disability tax credit

What is the disability tax credit?

The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. This amount includes a supplement for persons under 18 years of age at the end of the year.

The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers don’t have to face.

Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the working income tax benefit, and the child disability benefit.

Who is eligible for the DTC?

You are eligible for the DTC only if we approve Form T2201. A medical practitioner has to complete and certify that you have a severe and prolonged impairment and must describe its effects. To be eligible for the DTC, your impairment must be prolonged. To be eligible for the disability tax credit (DTC), you must meet the three following criteria:

  • Your patient must have an impairment in physical or mental functions that is prolonged, which means it has lasted or is expected to last for a continuous period of at least 12 months
  • Your patient’s impairment in physical or mental functions must be severe and it must restrict him or her all or substantially all of the time (at least 90% of the time)
  • Your patient’s severe and prolonged impairment in physical or mental functions must be certified by a medical practitioner using Form T2201, Disability Tax Credit Certificate

If CRA has already told you that you are eligible, do not send another form unless the previous period of approval has ended or if CRA tells you that they need one. You must tell CRA immediately if your condition improves.

If you receive Canada Pension Plan or Quebec Pension Plan disability benefits, workers’ compensation benefits, or other types of disability or insurance benefits, it does not necessarily mean you are eligible for the DTC. These programs have other purposes and different criteria, such as an individual’s inability to work.

Medical Expenses

You can claim only eligible medical expenses on your return if you, or your spouse or common-law partner:

  • paid for the medical expenses in any 12-month period ending in tax year you’re filing
  • did not claim them in prior tax year.

Generally, you can claim all amounts paid, even if they were not paid in Canada.

For all expenses, you can only claim the part of the expense that you or someone else have not been and will not be reimbursed for. However, the expense can be claimed if the reimbursement is included in your or someone else’s income (such as a benefit shown on a T4, Statement of Remuneration Paid, slip) and the reimbursement was not deducted anywhere else on the income tax and benefit return. There are so many expenses you can claim, I won’t list them here, however, you can go to this list, and see what’s eligible.

Which lines do you complete on your return?

You can claim eligible medical expenses on line 330 or line 331 of Schedule 1, Federal Tax, of your income tax and benefit return.

Line 330 – Medical expenses for self, spouse or common-law partner, and your dependent children born in 1998 or later

Use line 330 to claim eligible medical expenses that you or your spouse or common-law partner paid for:

  • yourself
  • your spouse or common-law partner
  • your, or your spouse’s or common-law partner’s children born in 1998 or later

Line 331 – Allowable amount of medical expenses for other dependents

Use line 331 to claim eligible medical expenses that you or your spouse or common-law partner paid for the following persons who depended on you for support:

  • your or your spouse’s or common-law partner’s child who was born in 1997 or earlier, or grandchild
  • your or your spouse’s or common-law partner’s parents, grand-parents, brothers, sisters, aunts, uncles, nieces, or nephews who were residents of Canada at any time in the year

Remember you can only claim those expenses that are over 3% of your net income (Line 236) or $2,208 (as of 2015).

Disability supports deduction

Individuals who have an impairment in physical or mental functions and have paid for certain medical expenses can claim the disability supports deduction under certain conditions.

Are you eligible?

If you have an impairment in physical or mental functions, you can claim a disability supports deduction if you paid expenses that no one has claimed as medical expenses, and you paid them so that you could:

  • be employed or carry on a business (either alone or as an active partner);
  • do research or similar work for which you received a grant; or
  • attend a designated educational institution or a secondary school where you were enrolled in an educational program.

You cannot claim amounts that were reimbursed by a non-taxable payment such as insurance. Expenses must be claimed in the same year they are paid. Unused amounts cannot be applied to another year. If you lived outside Canada for part or all of the year and we consider you to be a factual or deemed resident of Canada, you can claim disability supports expenses that you paid to a non-resident person for services provided outside Canada.

Child Disability Benefit (CDB)

The Child Disability Benefit (CDB) is a tax-free benefit for families who care for a child under age 18 who is eligible for the disability tax credit. A child is eligible for the disability tax credit when a medical practitioner certifies, on Form T2201, Disability Tax Credit Certificate, that the child has a severe and prolonged impairment in physical or mental functions, and the Canada Revenue Agency (CRA) approves the form. The CDB is paid monthly to the Canada Child Tax Benefit (CCTB) eligible individuals and also as a supplement to the Children’s Special Allowances (CSA).

The Child Disability Benefit (CDB) is a tax-free benefit of up to $2,695 per year ($224.58 per month) for families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions. The CDB is paid monthly to individuals who are eligible for the Canada Child Tax Benefit (CCTB) and also as a supplement to the Children’s Special Allowances (CSA).

If you have already applied for the Canada Child Tax Benefit (CCTB) for a child who is eligible for the disability tax credit, the CDB will be calculated automatically for the current and the two previous CCTB benefit years. Beyond these benefit years, a written request to the appropriate tax centre or tax services office will have to be submitted. If you have not applied for the CCTB for your child, but have already filed Form T2201, complete and send Form RC66, Canada Child Benefits Application to your tax centre. The CRA will determine whether or not you are eligible for the CCTB and the CDB supplement.

For the period of July 2015 to June 2016, the CDB provides up to $2,695 per year ($224.58 per month) for each child who is eligible for the disability amount. The CDB amount is calculated using a base amount, which is associated with the number of children for whom you receive the CCTB. You will receive the full CDB amount if your adjusted family net income is less than the base amount for your family size. The base amount ranges from $44,701 for one child to $73,477 for eight children.

If your adjusted family net income is more than the base amount, your CDB will be reduced as follows:

  • If you have one child who is eligible for the CDB, the amount of CDB is reduced by 2% of your adjusted family net income that is more than the base amount for one child for which you receive the CCTB (see the above chart).
  • If you have two or more children who are eligible for the CDB, the amount of CDB is reduced by 4% of your adjusted family net income that is more than the base amount for the number of children for which you receive the CCTB (see the above chart).

Registered disability savings plan

A registered disability savings plan (RDSP) is a savings plan that is intended to help parents and others save for the long term financial security of a person who is eligible for the disability tax credit (DTC).

Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. Contributions that are withdrawn are not included in income for the beneficiary when they are paid out of an RDSP. However, the Canada disability savings grant (grant), the Canada disability savings bond (bond), investment income earned in the plan, and rollover amounts are included in the beneficiary’s income for tax purposes when they are paid out of the RDSP.

The plan holder is the person who opens the RDSP and makes or authorizes contributions on behalf of the beneficiary. The holder does not have to be a resident of Canada. However, the beneficiary must be a resident of Canada when the plan is opened and when each contribution is made to the plan. RDSP payments can only be made to the beneficiary (or to the beneficiary’s estate after the beneficiary’s death). Contributors will not be entitled to a refund of their contributions.

Who can become a beneficiary of an RDSP?

You can designate an individual as beneficiary if the individual:

  • is eligible for the disability tax credit (DTC);
  • has a valid social insurance number (SIN);
  • is a resident in Canada when the plan is entered into; and
  • is under the age of 60 (a plan can be opened for an individual and contributions can be made to it until the end of the year in which he or she becomes 59 years of age). The age limit does not apply when a beneficiary’s RDSP is opened as a result of a transfer from the beneficiary’s former RDSP.

A beneficiary can only have one RDSP at any given time, although this RDSP can have several plan holders throughout its existence and more than one plan holder at any given time.

What is the contribution limit for RDSPs?

There is no annual limit on amounts that can be contributed to an RDSP of a particular beneficiary in a given year. However, the overall lifetime limit for a particular beneficiary is $200,000 (all previous contributions and rollover that have previously been made to an RDSP of a particular beneficiary will reduce this amount). Contributions are permitted until the end of the year in which the beneficiary turns 59.

There are some good credits and deductions for those with a disability, and those that have a dependent with a disability. If you do have a dependent with a disability, get the disability tax credit right away, and if you’re late applying, CRA will go back to the year the disability started (maximum 10 years).

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