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Disability Tax Credit

Wednesday, July 15, 2015

Disability Tax Credit

An often overlooked tax break that can be enjoyed by individuals is the disability tax credit (DTC). It is a non-refundable tax credit that can be used to reduce income tax payable on your tax return.

How much will it reduce your taxes?
For an Alberta resident for 2014, it amounts to a tax saving of up to $2,537, as long as the assessed taxes payable is at least that amount. If a dependent (i.e. spouse or child) qualifies for the DTC, but that individual does not have sufficient taxable income to use the DTC, the DTC amount may be transferred to you to use on your tax return.

How do you qualify?
A qualified practitioner (i.e. your doctor) has to complete a form T2201 and certify that you have a severe and prolonged impairment, which in turn needs to be approved by Canada Revenue Agency. To help determine if you may qualify, you can ask yourself the following questions:

  1. Has your impairment in physical or mental functions lasted, or is it expected to last, for a continuous period of at least 12 months?
  2. Are you blind?
  3. Do you receive life-sustaining therapy?
  4. Do the effects of your impairment cause you to be markedly restricted all or substantially all of the time in one or more of the following basis activities of daily living, even with appropriate therapy, medication, and devices?
    • Speaking
    • Hearing
    • Walking
    • Elimination (bowel or bladder functions)
    • Feeding
    • Dressing
    • Mental functions necessary for everyday life
  5. You meet all of the following conditions?
    • Because of the impairment, you are significantly restricted in 2 or more of the basic activities of daily living listed in Question 4 above, or you are significantly restricted in vision and one or more of the basic activities of daily living listed in Question 4 above.
    • These significant restrictions exist together at least 90% of the time.
    • The cumulative effect of these significant restrictions is equivalent to being markedly restricted in a single basic activity of daily living.

If you answered yes to Question 1 and to any one of Questions 2 to 5, you may qualify for the DTC.

The DTC can be granted for a 10 year period (if the condition persists at least that long) and can be applied retroactively if it is determined that the condition existed in a previous time period.

Don’t wait until tax-filing time to tax advantage of this. The DTC needs to be approved before you include it on your tax return, and your prior tax returns can be amended if you qualify in prior years. The process of applying for the DTC requires some effort, but if you qualify, it is well worth your time and effort in the tax savings you will enjoy….potentially for many years!

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