Rule: The Disability Tax Credit (DTC) eligibility is based on the disability lasting consistently for 1 year or more
The DTC is a doorway to the RDSP – people must qualify for the DTC before the can open a RDSP. Filing for the DTC can be one of the hardest parts of qualifying for an RDSP, for a number of reasons. One DTC barrier is the process of re-applying when it expires. Some DTC’s are given on a permanent basis and some are temporary and have an expiry date. Like most people, health can be affected by life changes, trauma, weather, or sometimes it’s affected by other unrelated health issues. For people with disabilities it’s no different and these changes can make the disability ‘episodic’ – which means for periods of time the disability is intensified or weakened (such as mental illness). For people with an episodic disability, re-applying for the DTC once it’s expired may be challenging and this may affect the accessibility of an RDSP. We’d like this to change.
The Policy in a Box
- When the DTC is issued, it’s designated as either “permanent” or “temporary”
- DTC eligibility is based on a person having a “severe and prolonged” disability
- “Prolonged” means the disability is expected to last, or has lasted consistently 1-year or more.
- Within a year, there could be a time when the disability is not as severe as before, and the person may no longer meet the DTC “prolonged” criteria – this might affect their RDSP
Why it matters:
The DTC is a significant benefit; it reduces taxes and provides a non-refundable credit that goes a long way for people who live on a low-income budget. For many, they are surprised to receive a refundable tax return that can date back 10 years! However, we have heard that the DTC can be difficult for people with episodic disabilities (such as mental illness), and are reluctant to open an RDSP if their DTC eligibility is temporary. We’d like the DTC criteria to consider people who have an episodic disability, so that they wouldn’t have to go through the same application process that someone does if they are applying to the DTC for the first time. There currently isn’t a bridging mechanism for a person who’s DTC expires and who need to re-apply.
Instead of using the “prolonged” criteria of a 1-year rule, what about extending the application to include the number of years the disability has persisted? What could a ‘temporary DTC re-application’ look like? Could it be shorter or simpler?
So, what do you think?
We’d like to hear your experience and thoughts about the DTC and RDSP, along with your ideas for solutions. At the time of launching the RDSP, there was a commitment to review the RDSP in 3 years- to look at what is working and what changes may be needed. The 3-year review is approaching and PLAN would like to hear your thoughts and feedback. Our intention is to listen, distill and take forward the experiences of individuals, families and communities to government decision makers.