CRA Improves Access to Disability Tax Credit; Includes Type 1 Diabetes
In June of 2022, the government announced that eligibility for the Disability Tax Credit (DTC) would be extended to include those suffering from Type 1 Diabetes. This means more families will qualify not only for the disability tax credit but may be eligible for an array of programs designed to bring support to individuals and families living with conditions that may interfere with everyday activities. In order to qualify for many of these programs, it is important to file income tax returns and engage a professional to maximize these benefits and reduce tax implications later.
Type 1 Diabetes now eligible for Disability Tax Credit
Those suffering from Type 1 Diabetes can apply for the Disability Tax Credit under the Life-sustaining Therapy category. Eligible therapies include dialysis, insulin therapy, oxygen therapy, chest physiotherapy, and other therapies. Therapies must take place at least twice a week for the years 2021 and 2022. Up to and including 2020, therapies must have been taken at least three times a week. Therapies must also have taken 14 hours a week which took away from other everyday activities. For a full list of what activities are included and excluded from the 14 hours a week, please visit Diabetes Canada.
What is the Disability Tax Credit?
The Disability Tax Credit (DTC) is a non-refundable tax credit that can be claimed on your income tax return. It can be claimed retroactively for up to 10 years, if you were submitting an income tax return and paying taxes and were living with a disability during that time. The DTC helps you claim other medical expenses, can be transferred to other family members or caregivers, and can help with access to other tax benefits, such as the RDSP.
To apply for the Disability Tax Credit, you will need to go to the CRA website for Form T2201, the Disability Tax Credit Certificate, and complete it along with your medical or nurse practitioner.
Reporting Income Tax for Eligibility Criteria
The Disability Tax Credit opens access to other tax benefits. Individuals receiving disability payments have chosen not to submit income tax returns, however, this can cause the individual to miss several opportunities for long-term savings and investment strategies related to disability support programs. These programs include the Registered Disability Savings Plan (RDSP), Canada’s Workers Benefit, and Child Disability Benefits.
Because the DTC is a tax credit, it must be applied to reported income. Other grants and bonds are also dependent on income tax returns. For adults, calculations are based on that individual’s reported income. For children, calculations are based on the combined reported income of both parents. Claiming the federal disability tax credit does not interfere with provincial disability tax credit qualification.
Incorporating the Disability Tax Credit into a long-term financial strategy
Submitting income tax returns is the foundation of building a long-term financial strategy around disability-related credits, grants, bonds, and programs. Engaging a professional to help you map out a plan will ensure you can maximize both government funding and tax credits.
- A Registered Disability Savings Plan (RDSP) is similar to a Registered Education Savings Plan (RESP) where personal and government contributions can be applied, and investment returns can grow tax-free within the account.
- The Canada Disability Savings Grant and Canada Disability Savings Bonds are paid into the RDSP and can yield substantial growth over the long term.
- Canada’s Workers Benefit (CWB) consists of base amounts PLUS a disability supplement.
- Child Disability Benefit (CDB) is a tax-free monthly payment calculated based on the number of children, adjusted family net income (AFNI), and marital status.
Between all the programs available, there is a substantial amount of savings and investing tools and opportunities available. Some are even available for up to 10 years retroactively. Many eligibility qualifications and calculations depend on income tax returns from the previous two to ten years. Which is why we recommend you work with a trusted professional or advisor to design a long-term savings strategy and plan that maximizes growth and reduces the risk of penalties and payback payments