If you or a loved one has been diagnosed with a disability or illness, a first step in getting your finances in order is to apply for the Disability Tax Credit.
There are distinct categories for those who are eligible for the Disability Tax Credit. Impairments that qualify for the DTC include:
- Eliminating (bowel or bladder functions)
- Mental Function
- Life-Sustaining Support
Mental function and life-sustaining support are a little less straight-forward and, thus, may require more information to CRA. For example, current regulations state that a person must spend 14 hours a week or more per week having life-sustaining support in order to qualify. This is where there may be grey areas in the assessment process, thus supporting material is important.
The Government of Canada Guide provides all the information you need to determine qualification for the DTC.
How do I apply for the Disability Tax Credit?
1. Get Form T2201 and complete Part A.
Complete Part A and print. This portion of the form is short and should only take about five minutes to complete.
2. Have your medical practitioner complete Part B.
Your family physician or specialist familiar with the patient’s condition will complete Part B of Form T2201, describing the illness or disability. How the doctor fills out this section will primarily drive the approval from CRA.
3. Submit Form T2201 via mail or CRA “My Account.”
Once Part A and Part B have been completed, you may mail it to your local tax center or uploaded through the CRA “My Account.” Or, you may want to ask your accountant for assistance.
4. CRA reviews the application.
CRA will assess the application upon receipt. It will generally take about eight weeks to hear a response from CRA.
Keep in mind, the assessment is based on the effect of the impairment, not the medical condition itself. Most of the categories in the form are fairly straight-forward, with a few exceptions that might require a bit more questioning from CRA before approval.
5. CRA sends you the decision.
If denied, and you disagree with the reasoning, you still have options. You may call CRA to discuss the decision, you may choose to submit additional supporting medical information for CRA to review, or you may file an objection. The objection process may take a bit longer than the initial approval process, but CRA will take time to reconsider the tax credit based on the facts presented.
If approved, CRA will let you know the time frame in which the credit is effective, and you may proceed to claim the DTC until the stated expiry date. (You may reapply in the future for a longer time period into the future.)
CRA may also approve the credit retroactively and could automatically adjust your tax returns and refund taxes for earlier years if you could have been approved prior to the application. It may be another eight weeks before a refund is directly deposited into your bank account and new notice of assessments are sent to you.
If the person that has the DTC approval doesn’t have any income, there may be no refund. It’s a non-refundable tax credit, so if you didn’t pay tax in the past, you won’t get tax back in the future.
If the condition improves to the point of disqualification for the DTC, you should discontinue the claims and notify CRA.
For details on how to utilize the Disability Tax Credit,visit our posts on Disability Tax Planning and the Registered Disability Savings Plan.