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One of the most overlooked tax credits is the Credit for Mental or Physical Impairment, usually called the disability tax credit, (“DTC”). The DTC is a non-refundable tax credit, which a taxpayer with a severe and prolonged physical or mental impairment can claim to reduce the amount of federal and provincial tax payable. An impairment includes, for instance, lack of normal capacity, with reasonable aids or medication, in:
To be eligible for the DTC, a taxpayer must complete and submit Form T2201, Disability Tax Credit Certificate, to Canada Revenue Agency for approval prior to becoming eligible for the tax credit. A qualified medical practitioner must certify various sections of the form that apply to the taxpayer. In some cases the form can be certified by a physiotherapist or occupational therapist, rather than a medical doctor. Many taxpayers may not be aware that they are eligible to claim the DTC Moreover, once Form T2201 is certified and approved by CRA, the taxpayer (or their designated representative) can usually apply to CRA to permit a claim for the DTC in all prior taxation years that the taxpayer was eligible to make the claim (subject to a 10 year carryback limitation). Parents may be able to claim the credit for a child who is eligible for the DTC if the child is not able to use it. Children cannot claim a parent's unused DTC. Eligibility for the DTC can also result in entitlement to other incentives such as enhanced tuition credits and education amounts, an additional $500 of eligible fitness expenses, increased child care deduction limit of $10,000, the ability to have a Registered Disability Savings Plan and extensions to the normal deadlines relating to Registered Education Savings Plans, to name just a few. Identifying eligibility for the DTC can result in thousands of dollars in tax refunds from retroactive claims and allow for entitlement to other unexpected incentives. TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes. |