Could You Be Eligible For the Disability Tax Credit

The Disability Tax Credit is often overlooked by many taxpayers who could be eligible. I have found that many clients assume they do not qualify for the tax credit because they do not have an obvious affliction, such as being confined to a wheelchair. I would like to share the basics of the Disability Tax Credit in order to make more taxpayers aware of the credit.

To explain the credit’s benefit, you need to be aware that it is a non-refundable tax credit. Essentially, non-refundable tax credits are available to taxpayers whom have taxes payable. If the credit is greater than the actual amount of taxes owing, the excess is not refunded to you. The unused credit can be transferred to the individual’s spouse or common-law partner. If the individual is under 18 it can be transferred to his/her parents and in certain circumstances this is true even if the child is over 18 years of age.

In 2010, the disability tax credit offered a federal non-refundable tax credit of $7,239 or tax savings of $1,086. There is also a provincial component and, in Ontario in 2010, the non-refundable tax credit was $7,225 or tax savings of $365, for a combined savings of $1,451.

But are you eligible? All taxpayers who wish to claim the Disability Tax Credit must have a medical practitioner complete Form 2201 - Disability Tax Credit Certificate to certify that the taxpayer was “markedly restricted” in one or more of the categories used to determine eligibility. The year of onset is also required for each applicable category.

Markedly restricted is defined by Canada Revenue Agency as all or substantially all of the time, even with therapy (other than life sustaining therapy) and the use of appropriate devices and medication.

Eligible categories include:

• Vision
• Speaking
• Hearing
• Walking
• Elimination (bowel or bladder functions)
• Feeding
• Dressing
• Performing the mental functions necessary for everyday life

In addition, life-sustaining therapy is eligible if it is to support a vital function. The term “markedly restricted” means all or substantially all of the time, even with therapy and the use of appropriate devices and medication.

Form 2201 can be completed and submitted to Canada Revenue Agency at any point in the taxation year. There is no requirement to apply in conjunction with your personal tax return. Once reviewed, Canada Revenue Agency will send the taxpayer a letter indicating what years are eligible for the claim. If eligibility extends back to prior taxation years, the taxpayer is entitled to file an Adjustment Request with Canada Revenue Agency in order to have the Disability Tax Credit included in those tax returns.

Form 2201 is available for download from Canada Revenue Agency’s website, and if you think it may apply to you or someone in your family, I encourage you to read through the form and bring it to your next medical appointment for your practitioner’s opinion. I should note that many medical practitioners charge a fee to the taxpayer in order to have the form completed. Although there is no set amount for this fee, the tax credit available if the form is approved will far outweigh the fee charged to have the form completed. This fee is also an eligible medical expense that the taxpayer can combine with other medical expenses, such as prescription drugs and dental services.

Approval of Form 2201 can result in additional non-refundable tax credits for the taxpayer, such as the ability to claim attendant care and nursing home costs as medical expenses.