The Disability Tax Credit Certificate (DTC)

One of my Globe and Mail columns this week touched on disability planning in Canada. As usual, there is a word count limit on my columns that precludes an exhaustive examination of most topics. There are many more programs and tax relief considerations when it comes to disability planning. One of which is the Disability Tax Credit Certificate (DTC). A reader sent me an email that I thought was worth sharing. They requested anonymity, which I’m happy to provide to anyone who wishes to make a contribution to this blog with info worth sharing. Enjoy.

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Check out the Disability Tax Credit Certificate (DTC) through the CRA website.

It works much like a non-refundable tax credit (ie. lowest marginal tax rate credit, currently 15% federal and depending on province).  A person may be eligible for a permanent certificate or a temporary one depending on the nature of the illness/disability.  For instance, parents with a child with Type 2 diabetes can be entitled to the credit on their personal T1 returns until the child has turned 16 ( I believe, don’t quote me on that age!).

Other people, such as the elderly with Alzheimers or terminal cancer, can received a permanent Certificate that they can use each year on their T1 returns until death. The certificate is an all or none kind of proposition – either you are approved or not, and it is not pro-rated for a tax year. If you become disabled on December 31, 2011 and are approved, you are entitled to use the FULL credit for the year 2011.

Example:

Taxpayer (BC resident) has Alzheimer’s disease dating back to 2008; subsequently dies in 2010.  On her T1 returns for 2008, 2009, and the final 2010 T1 return the taxpayer can claim a federal Line 316 amount, Schedule 1

PLUS a provincial Line 5844 , Form BC428 as follows:

2008    $7,021   X 15% = $1053.15   Fed             PLUS    $7,058  X  5.06% = $357.13 Prov           TOTAL:  $1,410.28
2009    $7,196   X 15% = $1,079.40  Fed             PLUS    $7,030  X  5.06% = $355.72 Prov           TOTAL:  $1,435.12
2010    $7,239   X 15% = $1,085.85  Fed             PLUS    $6,892  X  5.06% = $350.15 Prov           TOTAL:  $1,436.00

 

(NOT chump change for many Canadians).

There are some subtleties to this DTC:

  • If you are claiming the costs that are paid to be in a nursing home (as opposed to an assisted living/retirement home), than you cannot claim the DTC at all –  even if the amount is under $10,000 (unlikely except for part years).
  • Example One:  NURSING HOME

Mrs. Dolores Smith, who has advanced dementia and COPD,  resides full time at a nursing home located in Niagara Falls, Ontario.  At the end of 2011 she receives an annual statement showing she paid $43,000 over the year to live there with full services.  She would claim this amount as a medical expense IN FULL on her 2011 taxes.  Dolores  has a DTC but is not allowed to claim it.

  • Example Two:  RETIREMENT HOME OR ASSISTED LIVING ESTABLISHMENT

Her twin sister, Mrs. Janet Jones, who is diabetic,resides full time in a retirement  home in Brampton, Ontario. At the end of 2011 she receives an annual statement  showing she paid $30,000 over the year to live there.   The statement breaks down the attendant care services provided (ie. salaries and wages for staff) as $14,000 with the remaining $16,000 for rent . Janet has a DTC as well. Janet, unlike Dolores, has two choices for her 2011 tax return:

  • 1) Claim a maximum of $10,000 of the $14,000 attendant care expenses (medical expenses) AND the DTC.

OR

  • 2) Claim the $14,000 as attendant care expenses (medical expenses) and NO DTC.
  • Taxpayers must have a certified person, such as a physician, complete the CRA Certificate.  They usually charge for this service (in the area of $50) but it can be claimed as a medical expense.  The disability can be dated back several years and once approved, the taxpayer can ask to have their relevant T1 returns reassessed.  It should be noted that if a DTC is approved back to 2007, say, the taxpayer cannot assume that CRA will automatically reassess.  The taxpayer must request they do it.  A bit quirky but CRA needs to know that the taxpayer wishes to use it. Offhand, I can’t remember  how many years the CRA will go back retroactively.
  • The DTC can be transferred to a spouse if that is more tax advantageous with restrictions (ie. your income is so low it doesn’t change your tax liability but would be useful to your spouse with a higher income).
  • The credit amount for dependent children is supplemented so in fact is higher than the example given above.
  • The parameters for being granted the DTC are not as strict as CPP disability pension, I have been told.

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Thanks for the insight and detailed comments… whoever you are. ;)

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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Showing 7 comments
  • Big Cajun Man

    This is an important thing to consider and get for folks with kids with less visible disabilities too (Autism, ADD, etc.,), with the extra money you can afford more treatment for your child.

    • Preet

      Yes, I hope as many people apply as possible. With $1 billion in OAS unclaimed, I fear there are people leaving money on the table here too.

  • Disability Tax Service

    Hi Preet, good article. It’s good to see someone talking about the Disability Tax Credit and trying to inform others about it. There are many people who could be eligible for the Disability Tax Credit but who are not currently claiming it. I had to jump in because you mentioned you didn’t know how far back someone to claim the DTC. Just so you are aware, the Disability Tax Credit can be back filed ten calender years, due to the Fairness Provisions in the Income Tax Act. If you have any further questions, I’d be glad to help. http://www.disabilitytaxservice.ca/

  • Jean40

    Hi, Thank you for the post.  However, I do question the ability to claim both Nursing Home costs under Medical Expenses (to the maximum of $10,000) and the DTC.  CRA has a chart on page 14 of their publication “Medical and Disability – Related Information” that says for Nursing Home care you can claim the disability amount or these expenses, but not both.  Income Tax Act s. 118 2(2)(b.2) states “When the expenses are for full-time care in a nursing home, there is no limit on the total expenses that can be claimed as medical expenses for yourself or your spouse or common-law partner, but the disability tax credit cannot be claimed.”   As I am just doing some home research for a personal income tax return, I could very well be wrong.  Not sure if you are able to clarify this for me.  Thank you.

    • Preet

       @Jean40 Hi Jean, I asked the source to clarify. Here is the response:
       
      Hi Preet.
       
      1.  She is ENTIRELY correct.  I re-read my email that you posted and I guess I was not clear. Indeed if you are claiming the costs that are paid to be in a nursing home (as opposed to an assisted living/retirement home),than you cannot claim the DTC at all –  even if the amount is under $10,000 (unlikely except for part years).  
       
      Example One:  NURSING HOMEMrs. Dolores Smith, who has advanced dementia and COPD,  resides full time at a nursing home located in Niagara Falls, Ontario.  At the end of 2011 she receives an annual statementshowing she paid $43,000 over the year to live there with full services.  She would claim this amount as a medical expense IN FULL on her 2011 taxes.  Dolores  has a DTC but is not allowed toclaim it.
       
      Example Two:  RETIREMENT HOME OR ASSISTED LIVING ESTABLISHMENTHer twin sister, Mrs. Janet Jones, who is diabetic,resides full time in a retirement  home in Brampton, Ontario. At the end of 2011 she receives an annual statement  showing she paid $30,000 over the year to live there.   The statement breaks down the attendant care services provided (ie. salaries and wages for staff) as $14,000 with the remaining $16,000 for rent .Janet has a DTC as well.Janet, unlike Dolores, has two choices for her 2011 tax return:1) Claim a maximum of $10,000 of the $14,000 attendant care expenses (medical expenses) AND the DTC.OR2) Claim the $14,000 as attendant care expenses (medical expenses) and NO DTC.The choice is hers and she should seek tax advice as to which would be the best option for her to reduce her tax liability .
       
      There is my two cents.  Hopefully it does not muddy the waters.  A caution – Jean40 needs to be sure that she is talking about a nursing home as opposed to other retirement facilities that do not provide full nursing services.

  • Dio 1746

    I just learned about the disability tax credit, and decided to do some research on it. And came across this blog.
     
    I want to make a comment on people criticizing people  on disability or welfare that look able to work.
     
    This is a bit off topic for this thread,  but I still think it is relevant enough to be a forum to educate people on hidden disabilities.
     
    There are many people that look physically fit and able that are not able to work and are not employable.
     
    Mental disabilities come in many forms and are often difficult to diagnose.  I struggled all my life.  I would work a few months or a few  years  a couple of times  with a company who tried to help me.  My trouble is that I was extremely accident and screw up prone. I always put on a good front. I hid my disabilities  ( which are complex and many) as best as I could. I would look and act normal.   I would work harder than most,  but eventually screw so many things up or have so many accidents that the company  could not take it any more.  The cost of the losses was too much. Even worked for a couple of friends who eventually had to let me go. It was extremely  hard on me emotionally and self esteem wise, which I also buried.  I did not even know that I  could qualify for disability.  I had no clue.  Then when I  really got sick and landed up in the doctors office,  with a multitude of health problems, including digestive problems from stress,  the doctor suggested I get a psychological examination.  I still thought that was ridiculous.  He insisted that I get a psychological assessment done, and I reluctantly agreed.  And to my surprise I was diagnosed with schitzotypal personality disorder.  My symptoms are more than what is commonly defined by the disorder.  But that was enough to get me on disability. Thank God I live in a country that is sane enough to have such a program or and such a safety social net.  In common  language people call  it a ” screw up”  looking for  a place to happen. It is a condition where  a person can do nothing right.  It can take a few months of work ( stress)  to show up, but when it does the person is a danger to self and everything in the environment.  I tried so hard all  my 40 working yrs to do my best.  Many people would of committed suicide if they had taken the same road as I had.  But there is limit  for me too. Thank God again for disability pension  and disability tax credits and people who put them in place.  Without which I would of had to commit suicide. 
     
    I am certainly  not stupid.  But the brain can get damaged or screwed up in ways that is very difficult to understand.
     
    It bugs me that when normal people see people with physical disabilities they usually  go out of their way to help them if needed, but they scorn and abuse people with mental disabilities.  That is insanity in itself.  Those that do should walk a mile in that person’s shoes before they place judgment.
     
    It is my observation that most people are not qualified to comment on anything.
     
    And no one should comment on anything unless they have thoroughly  researched the subject and become an expert on the subject.  To not do so, is insanity, too.
     
     

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