The disability tax credit (DTC) is a non-refundable tax credit that those with disabilities, or the people who support them, can claim to reduce the amount of income tax owed. Individuals may claim the disability amount on their annual income tax return once eligible for the DTC.
The purpose of the DTC is to provide for tax equity by allowing some relief for disability costs since these costs are unavoidable expenses.
Being eligible for the DTC can open the door to other federal, provincial, or territorial programs. Possible programs include the registered disability savings plan, the Canada workers benefit, and the child disability benefit.
What are the eligibility guidelines?
An individual may be eligible for the DTC if they have an impairment in physical or mental functions that is severe and prolonged, resulting in a marked restriction. In all cases, the effects of the impairment must meet specific criteria under one of the following categories:
- eliminating (bowel and bladder functions)
- mental capacity necessary for everyday life
- the cumulative effect of significant limitations
- life-sustaining therapy
The individual’s impairment limits their ability to perform activities or functions in a category at least 90% of the time. If they are not limited at least 90% of the time, the individual may not meet the eligibility criteria.
Impairment has lasted for a continuous period of at least 12 months, or it is expected to last for a continuous period of at least 12 months.
If an impairment is severe and prolonged but does not cause the individual to have a marked restriction, the individual may still qualify under the cumulative effect of significant limitations or life-sustaining therapy.
How is eligibility determined?
Your medical practitioner provides the CRA with your medical information but does not determine your eligibility for the DTC. Eligibility for the DTC is not based solely on the medical condition but on the effects of the impairment.
Eligibility is not impacted by the receipt of other federal or provincial benefits. If you receive Canada Pension Plan or Quebec Pension Plan disability benefits, workers’ compensation benefits, or other types of disability or insurance benefits, you are not automatically eligible for the DTC. These programs have other purposes and different criteria, such as an individual’s inability to work.
To apply for the DTC, submit a fully completed Form T2201, Disability Tax Credit Certificate. This form has two parts. Part A is for the individual applying for the DTC; Part B is for their medical practitioner to complete and certify the individual has severe and prolonged impairment in physical or mental functions.
What happens after Form T2201 is submitted?
All applications are reviewed before the credit is allowed or denied. The decision is based on the information given by the medical practitioner and any supporting documentation that may support your proof of disability. If CRA needs more information, they will contact you or the medical practitioner.
After a decision, CRA will mail you a notice of determination.
You are responsible for any fees the medical practitioner charges to fill out the form.
If the application is approved
The Notice of Determination will show which year(s) you are eligible for the DTC. The Notice of Determination may also include information about other programs that depend on eligibility for the DTC. You do not need to send a new Form T2201 each year unless CRA tells you one is required.
You must advise CRA if your medical condition improves, and you no longer meet the criteria for the DTC.
If the application is denied
The Notice of Determination will explain why the application was denied with the decision usually based on the information given by the medical practitioner.
If you disagree with the decision, you can write to CRA and ask them to review your application. You must include any relevant medical information not already submitted, such as medical reports or a letter from a medical practitioner familiar with your situation. This information should describe how the impairment affects the activities of daily living.
You can also formally object to the decision. The time limit for filing an objection is 90 days after the mailing date of the Notice of Determination.
The application can be completed by the individual and is not that complicated. Beware of 3rd party agencies who charge a processing fee to do the application on your behalf. The fee can be excessive as it is based on the percentage of the Tax Credit rebated upon CRA’s approval.