Living with a disability? Explore your tax options
One in seven Canadians lives with a disability, yet only 500,000 Canadians claimed the Disability Tax Credit in 2009. Created to help with some of the additional expenses of everyday living and medical equipment, the credit is often overlooked even though it can mean big tax savings. People who care for a disabled person should also explore the credit, as caregiving costs may be covered. So if you think you might qualify, it is worth some time to discuss your situation with a tax professional.
An estimated 4.4 million Canadians now have a disability, according to the 2009 Federal Disability Report, an increase of two per cent from the last report. Pain, mobility and agility were the most common types of disabilities. Adults 65 and older had the highest increase of all the groups.
Yet many disabled persons do not claim the Disability Tax Credit, a measure intended to assist with some of the expenses of everyday living and medical equipment.
For tax purposes, a disability is a severe impairment which makes it difficult or time-consuming to carry out basic daily living activities. The impairment must also be long term and must severely restrict the ability to see, walk, speak, hear or perform personal-care activities or seriously affect mental capacity to manage personal affairs. This is true even when under treatment for the condition.
The cumulative effect of several impairments may also qualify. For example, a taxpayer with multiple sclerosis who constantly experiences fatigue, depressed mood and balance problems may qualify.
For 2010, the basic federal disability credit is $7,239, which translates into a federal tax savings of $1,086. The provincial tax savings vary depending on where you live. It is a non-refundable credit, so it only works to reduce your tax payable. You may be able to transfer any unused amount to a spouse or parent.
There are cases when taxpayers support a relative who does not meet the strict definition of “disabled” but is still dependent by reason of an infirmity. The caregiver amount is $4,223 for a potential federal tax break of $633. If you are eligible, the amount depends on whether or not the dependant lives with you and on the person’s age and income.
If you think you might qualify, you can answer the Canada Revenue Agency’s (CRA) questionnaire at www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/316/lgbl-eng.html.
The T2201 Disability Tax Credit Certificate (www.cra-arc.gc.ca/E/pbg/tf/t2201) should also be completed by an appropriate medical practitioner and sent to the CRA. It determines if you qualify and provides the approvals to claim the credit on your tax return.
If you are unsure if you qualify, it is better to ask than assume you don’t. Asking is free and it could help you at tax time.
If you have any questions about this article, ask the Tax Advisory at http://www.hrbtaxtalk.ca/submit-your-question/.
Senior tax pro and national spokesperson