Has Your (Or Your Family’s) Health Status Changed?

As we enter a new year, if your or a family member’s health status has recently changed, it may be an opportune time to explore whether this could unlock access to valuable financial support. Many people are unaware that a loved one might qualify for the Disability Tax Credit (DTC) — a tax credit that often serves as a gateway to other financial assistance programs and tax benefits.

With an aging population and growing awareness of physical and mental health conditions often diagnosed earlier in life, more individuals are becoming eligible for the DTC. Here are some situations where individuals might qualify:

• A senior whose daily living is impaired, such as the inability to complete daily goals like getting a shopping list together or buying groceries. This may be due to conditions such as cancer, Alzheimer’s or many others;
• Individuals with Type-1 diabetes;
• Children coping with ADHD;
• People with hearing or vision impairments, which may impact daily activities such as walking and meal preparation (these afflictions have specific criteria).

Eligibility depends on the effect the disability has on daily living rather than the diagnosis itself. Generally, this applies to individuals with a prolonged and present physical or mental impairment at least 90 percent of the time, for a continuous period of at least 12 months, who are unable to perform certain functions necessary for everyday life (or it takes three times longer than those not impaired). Individuals of all ages have qualified for the DTC. Even those who work full-time but suffer from mental health challenges have been eligible based on their circumstances.

An individual must apply for the tax credit, which involves working with a certified medical practitioner to complete a 16-page application form that must be submitted to and approved by the Canada Revenue Agency. While the application process may appear onerous, here are four reasons not to overlook the value of the DTC:

1. Substantial tax benefits — The federal disability tax credit is a non-refundable credit that can be claimed on an income tax return. The federal disability amount for the 2024 tax year is $9,872 for those 18 years and older, with an additional $5,758 supplement for those under age 18.
2. Potentially retroactive — If you were eligible for the DTC in past years but did not claim the disability amount, you may be able to claim it going back 10 years. A credit retroactively applied may result in a refund on previous tax returns.
3. It may be transferred — If the person with the impairment does not have income (such as a child), or cannot use the entire disability amount to reduce their taxable income, they may transfer some or all of the disability amount to a qualifying “supporting family member” for that tax year, helping to offset their taxable income.
4. A gateway to other benefits — The DTC can help access other important benefits, notably the Registered Disability Savings Plan (RDSP), which can allow up to $200,000 of after-tax funds to grow on a tax-sheltered basis, subject to conditions. The RDSP also offers the opportunity for $3,500 in federal matching grants annually, to a lifetime maximum of $70,000, depending on the beneficiary’s family income and the amount contributed. There are other federal and provincial/territorial benefits and programs. The DTC may also support the creation of a qualified disability trust, a valuable estate planning tool, to permit income to be taxed at graduated rates.

To learn more about the application process, please see the Government of Canada website: https://www.canada.ca/en/revenueagency/services/tax/individuals/segments/tax-credits-deductionspersons-disabilities/disability-tax-credit/how-apply-dtc.html

Eight Tips to Support a Disability Tax Credit Application
Here are some application tips, as suggested by a physician who helps individuals apply for the DTC:

1. Review the form before speaking to your healthcare provider.
2. Base responses on your worst days.
3. List any supports needed for daily life, like tools, community service, aides, caregivers, etc.
4. Highlight any anxieties if the impairment involves intellectual or learning challenges.
5. Note that hearing and vision impairments may contribute
   to other impairments like walking or meal preparation.
6. For the “goals” in the mental functions section, focus on daily tasks like going to the bank or creating a shopping list, and not long-term goals or aspirations.
7. Remember that walking limitations can result from neurological, cardiac or pulmonary issues, not just orthopedic and musculoskeletal impairments.
8. Certain chronic pain conditions may qualify, even if not specifically listed in the DTC criteria.

   https://www.advisor.ca/tax/tax-strategies/help-clients-apply-for-the-disability-tax-credit/