The Gateway:  Maximizing the Impact of the Disability Tax Credit

Ruth Horst

In addition to reducing income tax through a non-refundable credit, the Disability Tax Credit (DTC) serves as a gateway to a wide range of additional tax benefits and government programs. Eligibility for the DTC can unlock enhanced credits, financial supplements, and long-term savings opportunities that go well beyond the tax return. Understanding how the DTC connects to these broader supports is essential for maximizing financial stability—both for individuals living with disabilities and the family members who support them.  Unfortunately, many taxpayers miss this credit and their tax and financial advisors can certainly help when this happens.

Aside from the tax reduction benefits, the DTC also increases eligibility or exemptions for other credits. It’s a “gateway” credit.

For example, for the Home buyers’ Amount, individuals can typically claim the credit only if they haven’t owned a home in the current and prior 4 years. However, those with the DTC do not need to be first-time homebuyers. The home purchase must, however, be made to allow the person with the disability to live in a home that is more accessible and better suited to their needs.

For taxpayers that qualify for the Canada Worker Benefit, there is a disability supplement available for those that are eligible for the DTC and had working income during the year.

According to the CRA, beginning in July 2025, the Canada Disability Benefit will be introduced to reduce poverty and support the financial security of working-age people with disabilities. To be eligible the individual must meet all of the following criteria:

• Resident of Canada
• Eligible for the DTC
• Between18 and 64 years of age
• Filed a tax return for the previous year

The maximum benefit will be $2,400 ($200 per month). The credit will be income-tested and based on family income. It will be reduced by 20 cents for every dollar of income that is above $23,000 for single taxpayers and $32,500 for married or common-law couples. Additionally, a portion of working income will be exempted from the calculation - up to $10,000 for a single person and $14,000 for married or common-law couples.

Finally, individuals that have a DTC may also have a Registered Disability Savings Plan (RDSP) set up for them at a financial institution An RDSP is a savings plan designed to help individuals who are approved for the DTC save for their long-term financial security. In addition to allowing families to contribute to the RDSP, the Government of Canada also provides an annual grant. The maximum matching grant is $3,500 per year, up to a lifetime maximum of $70,000 for the beneficiary. The RDSP can receive a grant on contributions made until December 31st of the year the beneficiary turns 49.

Additionally, a bond of up to $1,000 per year is available to low-income Canadians with disabilities, with no contribution required to receive the bond. The lifetime limit for the bond is $20,000, and it is paid until the beneficiary turns 49.

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 as income to the beneficiary when paid out of an RDSP. However, the Canada disability savings grant, the Canada disability savings bond, investment income earned in the plan, and the proceeds from rollovers are included in the beneficiary's income for tax purposes when paid out of the RDSP

Bottom Line:  The Disability Tax Credit affects many areas of the tax return, and numerous potential credits and tax savings are often overlooked. If you are claiming any of these deductions, ensure that you have complete documentation and consult with your tax preparer to maximize your claims.  If the claim was missed, get form T2201 filled out and request an adjustment to prior filed returns.  A DMA-Tax Services Specialist can help.

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