Disability tax credit

Individuals suffering from a severe and prolonged mental or physical impairment can claim a federal disability amount of $8,001 for 2016. If the person with a disability is a child under 18, there’s an additional supplement of $4,667 for 2016, for a total disability amount of $12,668. To qualify, a doctor must certify on Form T2201 that there exists a severe and prolonged impairment that “markedly restricts” the individual’s daily living activities. The impairment must have lasted, or can reasonably be expected to last, for a continuous period of 12 months.

Those making a new application for this credit will find that the CRA will review the claim to determine eligibility before assessing the tax return. For this reason, if you’re claiming the disability tax credit for the first time, you must paper-file your tax return. Once approved, this credit can continue to be claimed as long as circumstances do not change. There is no requirement to file a new certificate each year unless the CRA asks for one.

A certificate may be requested for a deceased taxpayer, provided it could reasonably be expected that the serious and prolonged mental or physical impairment would have lasted more than 12 months had the taxpayer not died.

If you can’t take advantage of this credit, it may be able to be transferred to your spouse, common-law partner or other supporting person. The list of supporting relatives who can claim a person’s unused disability tax credit includes a parent, child, brother, sister, aunt, uncle, nephew or niece. Key to making the claim is that the person on whose behalf it is made must be “dependent on the taxpayer for support.”

No claim can be made for a person with a disability under this provision if anyone has claimed a medical expense credit relating to a full-time attendant or nursing home care for that person. On the other hand, the attendant care deduction (see topic 84) and the disability tax credit can both be claimed at the same time, as long as no additional attendant or nursing home claim has been made on behalf of the same taxpayer. To confuse this issue even further, the disability tax credit can also be claimed where an amount is claimed as a medical expense for attendant care (see topic 83), to a maximum amount of $10,000 per year. A 2010 tax case21 also found that the disability tax credit and a medical expense tax credit could be claimed for amounts paid to a home for the aged, as long as the amounts claimed for payments to the home were not claimed as full-time attendant or nursing home care, but under another qualifying medical expense provision (in this case, payments to a school or institution).

Tax tip: If you or anyone else paid for an attendant or for care in a nursing home or other establishment because of your impairment, consider whether the amounts should be claimed as a medical expense instead of claiming the disability tax credit. In some circumstances, both may be claimed (subject to certain restrictions).

The rules relating to this area of credits are exceedingly complex and often confusing. Before filing a return, it’s recommended that you have a tax adviser analyze your particular circumstances to determine the appropriate claim or combination of claims.

21 Greenaway v. The Queen (2010 TCC 42)