Disability tax credits Canadians need to know.
February 4, 2021
Living with a disability, whether mental or physical, can greatly affect your day-to-day life – especially financially. Often, disabled taxpayers have some unavoidable additional expenses that others don’t have to face, and they can quickly add up. To offset these additional costs, Canadians with disabilities are offered some additional tax credits and deductions.
But what exactly are these tax benefits and how can you claim them come filing time?
What is the Disability Tax Credit?
Perhaps one of the most important credits for those living with a disability is the Disability tax credit (DTC) – a non-refundable tax credit that reduces the taxes owing by Canadians with severe and prolonged physical or mental impairments.
But why is it one of the most important? Because being eligible for the DTC not only allows you to claim a federal maximum of $8,576 plus an additional supplement of up to $5,003 for those under the age of 18 (for 2020), but it can open the door to other federal, provincial, or territorial programs. These include the disability component of the Canada workers benefit and the child disability benefit.
It also opens the door to the registered disability savings plan (RDSP). This tax-free savings plan is designed to help you prepare for the long-term financial security of someone who’s eligible for the DTC. As of 2020, if the beneficiary becomes ineligible for the DTC, there’s no longer a time limit for how long their RDSP will remain open.
If if you’re eligible for the federal DTC you can also claim the corresponding provincial/territorial tax credit. If you didn’t claim these on previous returns, you can request an adjustment for up to 10 years.
In order to qualify for the DTC, you’ll have to have a medical practitioner complete the Form T2201, Disability Tax Credit Certificate, certifying that you have an impairment and describing its effects on your life.
Keep in mind that you can claim the DTC amounts for yourself or a dependant with a disability. If you don’t need the full credit to bring your tax owing to zero, you can also transfer it to your spouse or common-law partner, or another supporting person.
Disability Medical Expenses
In addition to the DTC, you’re also able to claim medical expenses for certain medicines, devices and treatments. This includes expenses associated with having a service animal, accessible computer software, changes you made to your home or car to make it more accessible and also sign-language interpretation services.
Additionally, if you have low income and high medical expenses, you might be eligible for the refundable medical expense credit.
Avoid paying GST/HST
You don’t have to pay service or sales taxes on some goods and services. This includes things like hospital parking, medical devices, home-delivered meals, and specially equipped motor vehicles.
In case you paid tax in error, you can always ask the supplier for a refund or credit. If they don’t give you a refund, you’ll have to apply to the CRA for a rebate by filling out Form GST189, General Application for Rebate of GST/HST.
The Home Buyer’s Plan
You may need to buy or build a home that works for you. To help offset these costs, there’s the Home Buyers’ Plan (HBP). This program allows you to withdraw up to $35,000 from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. Normally you have to be a first-time homeowner in order to participate in the Home Buyers Plan. However, for persons with disabilities, this requirement is lifted.
With the HBP, you can withdraw from more than one RRSP as long as you’re the owner of each account and you’re a first-time home buyer.
Although living with a disability comes with its challenges, remember that you can get some support – especially when it comes to taxes. Find an office near you to speak to a Tax Expert today.