Are you or your loved one managing all the finances accompanied by a disability? Life can feel so overwhelming for such people.
What if we tell you there’s a way the government of Canada cares for you and your loved one by providing you with financial relief? Yes, that’s true!
The government of Canada offers a disability tax credit for people with prolonged disabilities and health conditions. This is your sign to relieve yourself and get some help from the government.
This guide will help you get a detailed understanding of disability tax credit, how much will I get, and other queries like that!
WHAT IS THE DISABILITY TAX CREDIT?
It is a non-refundable tax credit that either significantly reduces your due taxes, or brings it all the way to zero if you meet the eligibility criteria.
Isn’t it the most relieving opportunity for people with disabilities? It definitely is!
This credit is designed to reduce the amount of income tax someone with a disability, or a supporting family member has to pay.
The purpose of Disability Tax Credit (DTC):
The DTC provides lots of benefits for eligible people, however, the primary aim of the Disability Tax Credit is twofold:
- To offset the costs associated with living with a disability.
- To help individuals become eligible for other disability-related benefits and programs.
The DTC plays a critical role in supporting the financial well-being of Canadians facing physical or mental impairments that substantially limit their daily activities.
ARE YOU ELIGIBLE FOR THE DISABILITY TAX CREDIT (DTC)?
Are you wondering about the disability tax credit and how much will you get? More than that, are you even eligible for this program?
To qualify for this program, you must meet the eligibility criteria first.
Basic eligibility requirements:
- A severe & prolonged impairment: The minimum period for the impairment to last is 12 months.
- A certified application by a medical practitioner: A medical doctor, psychologist, or other qualified health professional must verify the impairment and its impact on daily life activities. Otherwise, you won’t be able to proceed further.
Categories of disability:
According to the Canada Revenue Agency (CRA), the following categories of health impairments are eligible for the tax credit.
- Vision
- Speaking & hearing
- Walking & motor functions
- Mental functions necessary for daily life (thinking, response to a stimulus, memory, etc)
- Life-sustaining therapy requirements.
Age and dependency factors:
Both adults and children can qualify for the DTC. Additionally, a family member or caregiver can receive the credit if they are responsible for supporting a disabled individual, offering further flexibility in the application.
HOW TO APPLY FOR THE DISABILITY TAX CREDIT?
Now that you have an idea of the basic eligibility criteria, let’s move on to the application process. This is a 3 step process, and each step requires attention to detail. Therefore, read carefully and then act accordingly.
- Step 01: Complete form T2201:
Form T2201 is a disability tax credit certificate and is required to be filled out to get approval from the CRA. This form consists of two main parts.
Part A: It is to be completed by the applicant, providing basic information about the individual.
Part B: It is to be completed by a medical practitioner, detailing the nature and severity of the impairment.
For tips on avoiding common application mistakes, check out this guide on disability tax credit application mistakes.
- Step 02: submit the application to CRA
After filling out the form T2201, it’s time to submit it where it belongs. This can be done online, through mail, or with the assistance of a tax professional if additional support is required.
- Step 03: wait for the response
After submission, the CRA will review the form, often consulting with the medical practitioner if clarification is needed. This process may take anywhere from a few weeks to several months.
HOW MUCH PAYBACK WILL I GET?
After going through the process, now might be thinking about the disability tax credit and how much will you get. The exact payback amount under the DTC depends on several factors. It includes your annual income and whether the credit is being claimed retroactively for previous tax years. Here’s what you need to know about calculating your potential tax refund.
The Federal and Provincial Components of the DTC:
The Disability Tax Credit is divided into two components:
- Federal amount: For the 2024 tax year, the federal base amount is approximately $8,870. This amount is non-refundable, meaning it directly reduces your tax liability rather than providing a cash payout.
- Provincial amount: In Ontario, the provincial portion is around $9,001. This additional tax relief brings your potential benefit total to around $17,871.
Calculating Your DTC Refund: A Quick Guide
- Determine your eligible tax years:
You can claim the Disability Tax Credit for the current tax year or retroactively for up to 10 previous years if your disability existed but was not previously claimed.
- Multiply by the federal tax rate:
The federal rate is approximately 15%, meaning you could receive a tax credit of around $1,330 based on an $8,870 base amount.
- Add the provincial amount:
The provincial amount also uses a similar rate, which can yield an additional tax reduction. Combining both, individuals often see refunds that total several thousand dollars, particularly if filing for multiple past years.
For those thinking of registering a small business in Ontario, understanding tax credits like the DTC can be equally beneficial.
CONCLUSION:
We understand that the Disability Tax Credit and how much you’ll get can feel overwhelming. But the financial relief it offers can be life-changing. By understanding the eligibility requirements, following the application process, and maximizing the available refund, you can better manage the expenses associated with disabilities in Ontario. Consider consulting with a tax professional to ensure you’re getting the full potential benefit from the Disability Tax Credit and addressing any retroactive claims.