Eldercare/CA PrimePlus Services
Part 3/6 - Disability Tax Credit

By Anne Chun, C.A., CFP

This is part 3 of a series of articles on Eldercare/CA PrimePlus Services*.

In part 1 of this series, which discussed the various tax treatments of medical related expenses, Disability Tax Credit was identified as a tax credit and not a tax deduction. In this article, we will focus on the details of the Disability Tax Credit.

There are a number of conditions you have to satisfy before the tax credit can be claimed. These include:

  • You have a severe mental or physical impairment that caused you to be markedly restricted all or almost all of the time in your basic activities of daily living, AND
  • The impairment has lasted or is expected to last for a continuous period of at least 12 months.
  • Or (for year 2000 and later) if you would be markedly restricted but for a therapy, administered at least 3 times per week, to an average of at least 14 hours per week, to sustain vital functions. The need for this therapy must have lasted, or be expected to last, for a continuous period of at least 12 months. The therapy must be essential to sustain the vital functions of the patient, and could not reasonably be expected to be of significant benefit to persons without the particular disability.

You would qualify under the first condition if you are unable (or require an inordinate amount of time) to perform a basic activity of daily living, for at least 90% of the time, even with therapy and the use of appropriate devices and medication. In addition to blindness, examples of other disabling conditions include severe cardio-respiratory failure, severe mental impairment, profound bilateral deafness, and functional impairment of the neuro- or musculo-skeletal systems. Examples of "basic activities of daily living" include walking, speaking, perceiving, thinking and remembering, hearing, feeding and dressing, and eliminating bodily waste. General activities such as working, housekeeping, or a social or recreational activity do not qualify as a "basic activity of daily living".

For 2000 and later years, the eligibility was expanded to include life-sustaining therapy so that dialysis and cystic fibrosis patients are the likely beneficiaries. Life-sustaining therapy does not include implanted devices, such as a pacemaker, or special programs of diet, exercise, hygiene, or medication.

Not all people with disabilities can claim the disability amount. If you receive Canada or Quebec Pension Plan disability benefits, workers' compensation benefits, or other types of disability or insurance benefits, it does not necessary mean you can claim the disability amount. These programs are based on other criteria, such as an individual's inability to work.

If the above conditions are satisfied, you can claim a Disability Tax Credit of $6279 (for 2003 and indexed). In addition, you can claim either the Attendant Care Expenses (discussed in a separate article) or a Medical Expenses Tax credit (discussed in a separate article) up to $10,000 (or $20,000 in the year of death) for an attendant.

Depending on the costs of an attendant, it may be more advantageous to claim the attendant care expenses as a Medical Expenses Tax Credit (subject to an income test), instead of claiming the Disability Tax Credit, assuming that the Attendant Care Expenses Tax Deduction is not available. You cannot make a claim for the Disability Tax Credit if you, your spouse or a "supporting individual" claim the remuneration for a full-time attendant or care in a nursing home as a Medical Expenses Tax Credit. There is an exception if the attendant care claimed as a Medical Expenses Tax Credit is not greater than $10,000 and the same expenses have not been claimed as Attendant Care Expenses Tax Deduction by the patient.

For 2000 and later years, a (tax credit) supplement is also available for disabled persons under 18 (at the end of the taxation year). The maximum supplement of $3663 (for 2003 and indexed) is reduced by child care expenses or attendant care expenses in excess of $2145 (in 2003 and indexed) if claimed as a tax deduction or credit by anyone.

In the first year when you claim the Disability Tax Credit, your tax return should not be filed electronically because Form T2201 has to be filed with your return. Form T2201, or the Disability Tax Credit Certificate, has to be signed by a medical doctor, optometrist, audiologist, psychologist, occupational therapist or speech-language pathologists depending on your disability. Form T2201 has been changed for the 2003 taxation year. The form has been expanded from four to eight pages to incorporate both legislative and non-legislative changes.

According to the CCRA's web site, if you previously did not qualify for the Disability Tax Credit, you may wish to review the new Form T2201 and write to your Tax Centre for a review if:

  • Your ability to perform a "basic activity of daily living" has deteriorated since you last submitted Form T2201,
  • You have additional information provided by a qualified person that was not previously submitted, or
  • The basic activity of daily living that was restricted according to the form you previously submitted was "walking" or "perceiving, thinking and remembering".

In all cases, the person signing the form must be authorized to practise as such under the laws of the jurisdiction in which the taxpayer resides (that is, not restricted only to Canada). Specifically, a medical doctor can certify any of the conditions which amount to an impairment; an optometrist can certify an impairment of sight; after February 18, 1997, an audiologist can certify an impairment of hearing; after February 24, 1998, an occupational therapist can certify an impairment re: walking, feeding or dressing and a psychologist can certify an impairment re: perceiving, thinking and remembering; after October 17, 2000, a speech-language pathologist can certify a speech impairment.

You may not need all of your Disability Tax Credit to reduce your federal income tax to zero and this credit can be transferred to your spouse or to a "supporting individual". This topic will be covered in a separate article.

Next Part (Medical Expenses Tax Credit)

*CA PrimePlus Services is a registered trademark of the Canadian Institute of Chartered Accountants. Eldercare/CA PrimePlus Services is a customizable range of financial management services for elderly and disabled persons.

Anne Chun, C.A. CFP is the principal of Anne Chun Professional Corporation, providing financial, tax, estate and Eldercare services. She is also the co-author of "Planning your Financial Future".