The Disability Tax Credit, AKA the DTC, AKA the disability amount: who would think that it would be difficult to understand a tax credit? We get hundreds of questions about the DTC each week. What follows are the five most common misunderstandings about the disability tax credit:
1. Canada Revenue Agency denied my application so I am not eligible for the disability tax credit
Not necessarily. CRA denies people’s DTCs applications for many reasons; it’s not always because the person is not eligible. We have been appealing DTC denials for the past year. We have been successful in nearly every situation.
2. The Disability Tax Credit is not worth applying for because I don’t have any taxable income
Absolutely false. First, the Disability Tax Credit can often be transferred to an eligible family member with taxable income. Second, it is the eligibility requirement to be able to open a Registered Disability Savings Plan. Third, the federal and provincial governments have increasingly begun to administer social benefits through the tax system. A number of benefits, such as the Canada Child Disability Benefit, are worth money to the tax filer even if there is no taxable income.
3. A person on provincial disability benefits qualifies for the Disability Tax Credit
Not automatically. In most cases, a person on provincial disability benefits (like BC Persons with Disabilities Benefits or Ontario Disability Support Program) will qualify for the Disability Tax Credit but not always. More importantly the DTC has slightly different eligibility criteria (provincial benefits are generally more related to a person’s ability to work) and requires people to complete the application process whether they receive provincial disability benefits or not.
4. A person with Down syndrome, autism, cerebral palsy, multiple sclerosis or other disabling condition (i.e. a disability) will qualify automatically for the Disability Tax Credit
Not necessarily. Eligibility for the Disability Tax Credit is determined based on how the condition affects a person’s ability to carry out those tasks necessary for day to day life. A person with Down Syndrome or multiple sclerosis or any other condition may or may not be able to carry out these tasks therefore it follows they may or may not qualify for the DTC.
5. The Disability Tax Credit is only for people with disabilities
You would think so. The problem is there are many people who don’t think of themselves as disabled who have conditions that have a significant impact on their lives. Many of these people would qualify for the Disability Tax Credit but don’t apply because they think the DTC is for people with disabilities. The two most glaring examples are people with mental illnesses and people with learning disabilities but people with many medical conditions, such as kidney disease, heart disease, Alzheimer’s disease, also might qualify depending on how their condition affects their ability to carry out the basic tasks of daily living.
For more information on this important topic, check out Tax Planning for a Person with a Disability course at PLAN