Disability Tax Credit 2023: Eligibility Criteria, DTC Amount, DTC Transfer & How to Apply?

Inside: Know about Disability Tax Credit (DTC) for 2023, eligibility, application process, qualifying conditions, and how to maximize your benefit.

The Disability Tax Credit (DTC) is a helpful way for people with long-term and serious disabilities to get some financial relief. Since dealing with disabilities can be expensive, the DTC helps to reduce some of the taxes for individuals and their families. In this blog post i will show you what DTC means & how the beneficiaries can take advantage of it.

Key Points of Disability Tax Credit Scheme :

• Eligibility Criteria: To qualify, an individual must have a prolonged and severe impairment that significantly restricts one or more basic activities of daily living, as certified by a qualified healthcare practitioner. Alternatively, they must need extensive life-sustaining therapy.
• Non-Refundable: It reduces the amount of income tax that an eligible person has to pay. However, it’s non-refundable, meaning it can lower the tax you owe, but you won’t get a refund based on this credit alone.
• Federal Credit Amount: The maximum federal non-refundable Disability Tax Credit amount for 2023 is $8,948. This is an increase of $78 from the 2022 amount of $8,870.
• Supplement for Children Under 18: If the individual eligible for the DTC is under 18 years of age at the end of the year, an additional supplement of $5,174 may be claimed by the individual or their caregivers.
• Retroactive Claims: The DTC can still be claimed retroactively for up to 10 years if the impairment existed during those prior tax years.
• Application Process: Eligibility must be formally reviewed and approved by the CRA based on a filled and submitted Form T2201, the Disability Tax Credit Certificate, which has been certified by a medical professional.
• Transferring the Credit: As in previous years, if the eligible individual does not have enough taxable income to use the entire DTC, they can transfer a portion to their spouse, common-law partner, or other eligible supporting individuals.

What is the Disability Tax Credit?

The Disability Tax Credit is a non-refundable tax credit used to decrease the income tax payable on the tax return of a person who is disable or or can claim DTC benefit for their supporting family members. This claim recognizes the extra costs born due to severe and prolonged impairments and aims to provide financial relief to mitigate these expenses.

Purpose and Impact:

The primary purpose of the DTC is to provide tax equity by allowing some relief for disability costs, which are unavoidable additional expenses that other taxpayers don’t have to face. These costs can include, but are not limited to, paying for personal support workers, accessible transportation, and therapeutic services.

By reducing the taxable income of an individual with a disability or their caregiver, the DTC acknowledges the financial challenges posed by disabilities and attempts to mitigate these through the tax system. It plays a crucial role in the broader social safety net provided by the Canadian government to support its citizens with disabilities.

Disability Tax Credit Amount 2023

In 2023, the amount of the DTC has been adjusted to reflect current economic conditions. The credit aims to offer substantial tax relief, but the exact value can vary based on the individual’s tax situation and the severity of the impairment.

How to Apply for the Disability Tax Credit

Before you apply, make sure you or the person you’re helping qualifies for the Disability Tax Credit according to the rules set by the Canada Revenue Agency. This means the person must have a serious and long-lasting disability that affects their body or mind. Please go through below mentioned points for better idea of Eligibility:-

1. Eligibility Criteria: Before starting the application process, ensure you or the person you’re applying for meets the Canada Revenue Agency’s (CRA) eligibility criteria for the DTC. This includes having a severe and prolonged impairment in physical or mental functions.
2. Obtain Form T2201: If you have confirmed the above CRA criteria then your application process for DTC begins with Form T2201 also know as the Disability Tax Credit Certificate. This form is available for download from the CRA website, or you can request a paper copy by contacting the CRA.
3. Complete Part A of Form T2201: Part A of the form requires personal information about the applicant and must be filled out by the person with the disability or their legal representative.
4. Have Form T2201 Certified by a Qualified Practitioner: Part B of Form T2201 must be completed by a qualified practitioner who can certify the effects of the impairment. This could be a medical doctor, optometrist, speech-language pathologist, audiologist, occupational therapist, psychologist, or physiotherapist, depending on the nature of the impairment. There might be a fee for this service, which is not covered by the CRA.
5. Submit the Form to the CRA: Once both parts of Form T2201 are completed, submit the form to the CRA for review. You can mail the completed form or, in some cases, submit it through your CRA My Account online portal if you’re registered for one.
6. Wait for CRA’s Decision: The CRA will review your application and notify you of their decision. This process can take several weeks. If your application is approved, the CRA will determine the years you are eligible for the DTC and inform you about how to claim the credit on your income tax return.
7. Claim the DTC on Your Income Tax Return: Once approved, you can claim the DTC when filing your annual income tax return. If you were eligible for the DTC in previous years but did not claim it, you might request adjustments for up to 10 years under the CRA’s Taxpayer Relief Provision.

Disability Tax Credit Eligibility Criteria

The Canada Revenue Agency (CRA) sets specific eligibility criteria for the Disability Tax Credit (DTC) to ensure that this financial support reaches those who need it most due to significant and prolonged impairments. Understanding these criteria is crucial for anyone considering applying for the DTC. Here’s a breakdown of the key eligibility requirements:

Severe and Prolonged Impairment

For an individual to qualify for the DTC, they must have a severe and prolonged impairment in physical or mental functions. According to the CRA:

● Severe means that the impairment restricts the individual’s ability to perform a basic activity of daily living, or the individual requires extensive therapy to sustain a vital function. The impairment must be present at least 90% of the time.

Basic Activities of Daily Living by CRA

The CRA considers the following as basic activities of daily living:

• Walking
• Feeding or dressing oneself
• Mental functions necessary for everyday life
• Hearing
• Speaking
• Elimination (bowel or bladder functions)

● Prolonged means impairment has lasted, or is expected to last, for a continuous period of at least 12 months.

Certification by a Qualified Practitioner

To apply for the DTC, a qualified practitioner must certify that the applicant has a severe and prolonged impairment. The practitioner, depending on the nature of the impairment, could be a doctor, optometrist, audiologist, occupational therapist, psychologist, or another medical professional authorized by the CRA.

Medical Conditions that Qualify for Disability

There are many medical conditions mentioned by CRA that are eligible for DTC claim, as long as the condition significantly restricts one or more basic activities of daily living over a prolonged period, typically at least 12 months. Additionally, the individual must have a medical practitioner certify the extent of the impairment. Here are some categories of medical conditions that commonly qualify:

1. Mobility Impairments: Conditions that severely affect an individual’s ability to walk or move independently fall under this category. Examples include paraplegia, quadriplegia, and severe forms of arthritis.
2. Mental Functions Necessary for Everyday Life: This includes conditions that drastically impact cognitive functions required for daily living, such as memory, problem-solving, and adaptive functioning. Conditions like Alzheimer’s disease, severe ADHD, and autism spectrum disorders may qualify.
3. Vision: Severe vision impairments that significantly restrict an individual’s ability to see clearly, even with corrective lenses or medication, can qualify for the DTC.
4. Hearing: Individuals with profound hearing loss in both ears are often eligible for the DTC.
5. Life-Sustaining Therapy: Conditions that require life-sustaining therapy to support vital functions, which must be administered at least three times per week for an average of at least 14 hours per week, also qualify. Examples include diabetes requiring insulin therapy through an insulin pump, kidney failure requiring dialysis, and other similar conditions.
6. Speaking and Eating: Significant impairments affecting the ability to speak or feed oneself qualify. This could include conditions like severe speech impediments or disorders that severely limit physical ability to feed oneself.
7. Elimination (Bowel or Bladder Functions): Impairments that significantly affect one’s ability to manage bowel or bladder functions, leading to an almost constant need for assistance.

To qualify for the Disability Tax Credit, it’s not just about what illness you have. What really matters is how much your illness changes your daily life and if it fits the rules set by the Canada Revenue Agency.

Disability Tax Credit Transfer and Claiming the Credit

When it comes to the Disability Tax Credit (DTC), an important feature is the ability to transfer the credit, a process that offers flexibility and additional financial support to families of individuals with disabilities. This helps ensure that the maximum possible benefit can be utilized, providing substantial relief to those who need it most.

Transferring the Disability Tax Credit

If the person with the disability doesn’t owe enough taxes to use the full amount of the DTC, they have the option to transfer some or all of the leftover credit to a family member who supports them. This could be a parent, spouse, or another relative who has been identified on the DTC application form.

The transferability of the DTC ensures that the tax benefits are not wasted if the individual with the disability has a low income and therefore a low tax liability. Instead, the financial advantage can be shifted to a supporting relative who has a higher tax bill, allowing the family as a whole to benefit from the credit.

To Transfer the credit:

1. The person with the disability or their guardian must fill out Part A of the DTC application form.
2. A medical practitioner needs to certify the application, affirming the severity and permanency of the disability.
3. On their tax return, the supporting family member can claim the transferred amount in the section dedicated to the DTC.

Claiming the Disability Tax Credit

Claiming the DTC involves a few key steps:

1. Application Approval: First, ensure that the Canada Revenue Agency (CRA) has approved the DTC application. This means submitting Form T2201 where a medical practitioner certifies the presence of a severe and prolonged impairment.
2. Filing Your Tax Return: Include the amount of the DTC on your income tax return for the year. It’s critical to follow the instructions carefully to ensure the credit is applied correctly.
3. Transferring Unused Amounts: If applicable, decide whether any unused portion of the DTC will be transferred to a supporting family member, and include this on your tax return as well.

The key to successfully claiming the DTC lies in understanding eligibility criteria, accurately completing the required documentation, and effectively communicating with the CRA if needed.

The Disability Tax Credit is a big help for people with disabilities and their families. It makes dealing with money problems easier when someone has a disability for a long time. If people know how to use this credit and they qualify for it, they can live better and have less money worries.

FAQ’s