What is the disability tax credit?
The government of Canada offers the disability tax credit (DTC) to someone who meets certain criteria under the Income Tax Act. The credit may also be transferred to another person in certain circumstances. As the credit could yield a potential tax savings of approximately $1,700 per year for an adult and $2,500 per year for a child under 18, this article aims to provide some key information to help you determine whether you or someone that you know may qualify for the DTC.
If a person was eligible for the DTC some years ago, but did not claim it, it is possible to go back up to ten years to claim it.
If the vision in both of a person’s eyes, even after the use of corrective lens, is 20/200 or less or has a field of vision of 20 degrees or less, thenthe personis eligible for the DTC.
In addition, there are seven categories of basic daily living activities in which a person may qualify for the DTC. They are speaking, hearing, walking, eliminating, feeding, dressing and mental functions. The impairment in these activities must be expected to last over one year and is present at least 90% of the time, even with appropriate devices, medication and therapy (except for life-sustaining therapy).
Furthermore, ifa personis “markedly restricted” in one of the seven above activities or are “significantly restricted” in two of the seven above activities, thenthe person iseligible for the DTC. Markedly restricted means a person is unable or takes an inordinate amount of time to complete the activity. An inordinate amount of time usually means three times the average time needed for a person (of the same age) without the impairment.Significantly restricted means a person takes longer than average time to complete the activities, but not as long as someone who is markedly restricted.
For example, a person who has advanced dementia and cannot remember basic things like his/her name and home address is considered markedly restricted. A person who takes longer time than average to walk and dress due to arthritis (and medicine isn’t helping much) is considered significantly restricted.
Life-sustaining therapy is when the therapy is for a vital body function and is needed for at least 3 times per week, totaling a minimum of 14 hours per week. Such therapies that may qualify for the DTC include kidney dialysis and insulin for diabetes treatment.
If the person with the impairment has low income and does not need the DTC, the credit could be transferred to a person who lives under the same property or who provides financial support for basic necessities such as food, shelter or clothing.
If you would like to discuss whether your or your loved one’s specific situation qualifies for the disability tax credit, please do not hesitate to contact us for a free consultation.