January 17, 2017
The Disability Tax Credit
By Jim Murphy CPA, CGA
Did you know that if you have a severe, permanent and prolonged inability to perform everyday tasks you can save up to $1,400 in income tax a year and be able to claim the cost of attendant care? In order to qualify for the credit you need to have your doctor complete form T2201, the Disability Tax Credit Certificate. If you or a dependent have an impairment in either physical or mental function that has lasted twelve months or more and that significantly impacts your ability to do everyday tasks then you may qualify for the Disability Tax Credit (DTC). In the case where a dependent qualifies you can transfer any unused credit to your return. Since the credit is, at the time of this article, non-refundable you also need to have taxable income in order to benefit from the credit. Generally, seniors with income under $20,000 will not be taxable so even if eligible for the credit there will be no tax savings.
If you think you might be eligible and able to benefit from the DTC the next step is to obtain the Disability Tax Credit Certificate (Form T2201) from the Canada Revenue Agency (CRA) or your tax preparer. You can download a copy of the form from the CRA website (www.cra-agc.gc.ca/forms) or call the general inquiries line (1-800-959-8281) to have one sent to you. Once your doctor has certified that you have a qualifying disability then submit the form to CRA either directly or with your next personal tax return.
The CRA will take several months to decide if you are actually eligible for the credit although in my experience once the form has been signed by a physician the certificate is always granted. You will receive a letter confirming the award of the certificate and the effective date of the credit. You will be able to request adjustments to your personal tax returns to claim the credit back to and including the taxation year when the disability started. There is a ten-year general limitation on claiming credits so if the condition started in 2006 or earlier one can only go back to 2007 since we are now in calendar year 2017.
Normally your doctor will charge a fee for preparing the Tax Credit Certificate (T2201). This fee is eligible for the medical expense tax credit (METC) in the year it was paid. In addition, once eligibility for the DTC is established expenses related to attendant care are also eligible for the METC. For example, amounts paid to a private attendant care provider would be eligible as would a portion of the fees paid to a care home. The maximum attendant care amount that can be claimed in conjunction with claiming the tax credit is $10,000. However there is no limit on the attendant care amount that can be claimed if the DTC is not claimed. So a person with $20,000 or more in attendant care expense would be better off claiming the attendant care amount and not claiming the DTC itself. Note that one still has to be have been certified for the DTC by CRA in order to claiming any attendant care expenses.
You may have seen or heard advertisements from firms offering to claim the DTC on your behalf for a contingency fee. You pay nothing up front and you will owe the firm up to thirty per cent of the amount recovered. Before signing any agreement, I would strongly recommend you contact your tax preparer and get an estimate of the cost. You may find that is considerably less than the up to $420 per taxation year that would be payable under a contingency arrangement.
For more information you can download the Disability-Related Information guide (RC4064) from the CRA web-site or have one sent to you by calling the general inquiries line. The advice provided above is general in nature and professional advice regarding your particular situation should always be obtained before proceeding.
Jim has been the volunteer Treasurer of Seniors Come Share since 2015. He is a founding partner of Murphy and Murphy, Chartered Professional Accountants with offices located White Rock and Tsawwassen (www.murphyandmurphy.ca).