The Disability Tax Credit (DTC) has become an important source of support for many people with disabilities in recent years, particularly since the introduction of the Registered Disability Savings Plan (RDSP) in 2008.
People who qualify for the DTC may gain access to significant income tax relief for themselves and their families. People who are 49 and under also open the door to accessing up to $90,000 in government grants and bonds over the term of the RDSP.
We strongly encourage people with disabilities who might qualify for RDSP grants and bonds to apply for the DTC. At the same time, both the DTC and RDSP have some pitfalls and challenges which should be considered by anyone who wants to access them.
What follows is an overview of some of the points you need to know about applying for the DTC and RDSP.
Disability Tax Credit Eligibility Criteria
Some people become discouraged about applying for the DTC because they believe they have to be “totally disabled” to qualify. Others apply and are denied even though, objectively, they have a significant disability.
One important point to remember in considering whether to apply for the DTC is there are ten different categories of disability. You only need to meet the requirements of one of those categories to be eligible. This usually means you need to have a marked restriction in one area such as vision, walking, feeding or mental functioning. You do not need to have a disability in every category.
If your disabilities cause a moderate impact in multiple areas, we recommend you talk with your doctor about applying under the “Cumulative Impacts of Significant
Restrictions” category. You may also qualify, if you require certain life sustaining therapies.
One important point to remember in considering whether to apply for the DTC is there are ten different categories of disability. You only need to meet the requirements of one of those categories to be eligible.
Like many disability support programs, the DTC application requires information from a doctor or other qualified health practitioner about how your disabilities affect your life. However, unlike many disability assistance applications, doctors are not provided any extra compensation for filling out the DTC form. Some doctors choose to charge their patients a fee to fill out the form. This can be a barrier for people with disabilities living on a low income.
Some doctors are willing to offer reduced fees or to waive fees for people living on low-income. If you want to apply for the DTC, but cannot afford to pay your doctor’s fee, it’s worth asking him or her if they would consider waiving or reducing their regular fee. We encourage you to contact a disability advocate for advice about how to facilitate better communication with your doctor.
Not Enough Information
The Canada Revenue Agency may deny a DTC application or ask for follow-up information from your doctor, if they do not think there is enough information provided on your original application. You have a better chance to qualify if your doctor provides detailed information about your disability in the section of the DTC application called “Effects of impairment.” This key section should focus on the extent to which your disabilities impede your daily functioning within one of the application’s established categories of disability. You may want to prepare some thorough notes for your doctor about the effects of your disability or ask if an advocate, family member or friend can help you to do this.
In some ways, the DTC is a regressive tax benefit. It helps people with higher incomes more than it does those with low incomes.
The Canada Revenue Agency may approve your DTC for one year, multiple years or indefinitely, depending on how long they think your disability will continue. This means that you may need to reapply for the DTC many times. It is also possible to lose eligibility for the DTC.
Once you have an RDSP, it is extremely important to maintain ongoing eligibility for the DTC. Government policy requires that an RDSP be closed by December 31 of the year after the year you lose eligibility for the DTC, unless there are special circumstances. If your RDSP is closed, you risk losing the grants and bonds that you have accumulated. We recommend that you keep old copies of your DTC application to make the process of reapplying easier—and that you make note of if and when you will need to reapply.
Not Enough Support for People with Low Income
In some ways, the DTC is a regressive tax benefit. It helps people with higher incomes more than it does those with low incomes. It can offset taxes that you owe, but provides limited relief for people who do not owe income tax. For many people living on low incomes, the benefits of the RDSP are still very worthwhile. You can read about these benefits throughout Transition.
Have questions or need assistance with the DTC? DABC is able to assist individuals through one on one support. Call their Advocacy Access line at 604-872-1278 or 1-800-663-1278, or email firstname.lastname@example.org.
Sam Turcott is Program Director of Advocacy Access and Manager of Tax AID DABC
For more articles on the RDSP and DTC view Transition Magazine, Summer 2017