Fall Reviews:  Did You Claim the Disability Tax Credit?

The Disability Tax Credit (DTC) may be one of the lesser understood tax credits but for your clients who have a disability it is critically important. Having a conversation with your clients about health changes in their life circumstances and those of their loved ones could help them access this tax credit.  

The Backdrop: The purpose of the DTC is to reduce the income tax those with a physical or mental impairment may have to pay. It is a non refundable credit so if the DTC exceeds the amount a person owes on their taxes, CRA does not refund the remaining amount of the credit.

To qualify for the DTC, your client must first have a medical professional certify the disability. That’s the first step. The second step is where you come in. The person must then claim the credit on their tax return. 

The Criteria: As for who is eligible, CRA states “if a medical practitioner certifies that you have a severe and prolonged impairment in 1 of the categories (listed on the required form T2201 Disability Tax Credit Certificate -) significant limitations in 2 or more categories, or receive therapy to support a vital function.”

Those categories include walking, mental functions, dressing., hearing, vision, speaking, life sustaining therapy or even bowel or bladder functions. If one of those does not qualify an individual for the DTC, it may be that 2 or more are present in which case that person could qualify.

For example, if the individual takes 3 times longer than a person of a similar age without a disability to perform a task or if 2 or more of the conditions are present 90% of the time, that person would qualify for the DTC.

The Application: The medical practitioner must fill out his or her portion of the application. Once your client has been certified as having one or more disabilities, you can assist them in filling out the application for CRA. This may be difficult or even impossible for the person with the disability to do on their own. An alternative is to have a legal representative to sign off on their behalf.

Your client will need to be aware that CRA will review the application, and approval may take some time. CRA may ask for more information or contact the medical professional. In June CRA issued a notice that it is experiencing delays in processing form T2201.

Tax Nuances and Options: If the person with the disability does not need the entire credit, a portion of it may be transferred to a supporting family member who is responsible for helping to provide the necessities of life.

If your client is claiming the benefit for him or herself, it appears on line 31600. If the claim is to be transferred to someone other than a spouse or common-law partner, it will appear on line 31800. If your client is the spouse or common law partner of the person with the disability, the claim is then entered on line 32600 and Schedule 2 of the T1.

If the medical practitioner charges a fee for the assessment, those fees are tax deductible and can be entered on lines 33099 or 33199 of the person’s tax return as a medical expense. Most people don’t know this.

For persons with disabilities, navigating the labyrinth of tax and medical forms can be daunting.  This is where you can do really important work.

Remember, if they were eligible for the DTC in past years but did not claim it, they can go back as far as ten years. The amounts have increased from $7,899 in 2015 to $9,872 in 2024. There are additional supplements for children under 18 for the purposes of claiming their DTC but also in other cases, once the DTC is in place. 

For example, your clients with disabilities may not be aware that they might also qualify for  investments under the RDSP (Registered Disability Savings Plan), the Canada workers benefit disability supplement and the child disability benefit.   In addition, the working disabled may also qualify for the new Canada Disability Benefit.

The Bottom Line: If your client has one or more disabilities you may need to take a little more time to make sure they are indeed accessing all their tax benefits – thereby significantly improving their financial lives. You just might find it improves your life