Dis­abil­ity tax credit is fre­quently over­looked

The Hamilton Spectator - - BUSINESS - SAB­RINA DIFEDERICO

As a fi­nan­cial ad­viser, I of­ten en­counter fam­i­lies who aren’t max­i­miz­ing their tax cred­its.

It may be they don’t un­der­stand the ap­pli­ca­tion process, they think it’s not worth it if their in­come is too low, or they don’t re­al­ize they qual­ify for spe­cific pro­grams.

For ex­am­ple, do you have a child who strug­gles with se­vere ADHD? Does it take you a long time to climb a flight of stairs? Are you car­ing for some­one who is re­ceiv­ing life-sus­tain­ing ther­apy? If so, you may be el­i­gi­ble for the dis­abil­ity tax credit (DTC).

In my ex­pe­ri­ence, the DTC is one of the most fre­quently over­looked tax-sav­ing op­por­tu­ni­ties.

Yet, it could save you and your fam­ily money: in 2016, if you lived in On­tario and claimed the DTC, you could save $1,608 in in­come tax or $2,546 if the amount was for a mi­nor child. Why is this credit missed so of­ten?

It must be ap­plied for sep­a­rately from other dis­abil­ity ben­e­fit pro­grams.

To claim the DTC, you must sub­mit a com­pleted T2201 (cra.gc.ca/ dtc) and be ap­proved by the CRA. If you cur­rently re­ceive ODSP ben­e­fits, you may think that the govern­ment “al­ready knows” about your dis­abil­ity and will au­to­mat­i­cally reg­is­ter you for the DTC.

How­ever, these pro­grams are not con­nected and you must ap­ply for them in­de­pen­dently.

Qual­i­fi­ca­tion for one pro­gram does not guar­an­tee that you are el­i­gi­ble for the other, but you may qual­ify for both.

The in­di­vid­ual with the dis­abil­ity has no tax­able in­come so there is as­sumed to be no ben­e­fit.

The DTC is a non-re­fund­able tax credit. This means that it re­duces in­come tax payable, but isn’t re­funded if you don’t pay tax. How­ever, un­used cred­its can be trans­ferred to a spouse or a care­giver, who may have higher tax­able in­come. In ad­di­tion, eli­gi­bil­ity for the DTC qual­i­fies you for other pro­grams and ben­e­fits, such as the Reg­is­tered Dis­abil­ity Sav­ings Plan (RDSP) and/or the Child Dis­abil­ity Ben­e­fit (CDB).

The RDSP is a gen­er­ous matched-sav­ings pro­gram where in­di­vid­u­als un­der the age of 49 could re­ceive up to $70,000 in life­time grants, with an ad­di­tional $20,000 in Canada Dis­abil­ity Sav­ings Bond for low-in­come fam­i­lies. Al­ter­na­tively, the CDB is a tax-free ben­e­fit for fam­i­lies with chil­dren un­der 18 who re­ceive the DTC. The CDB has a max­i­mum en­ti­tle­ment of $2,730 per year based on fam­ily in­come.

The per­son who qual­i­fies does not con­sider them­selves “dis­abled.”

The DTC is an ac­knowl­edge­ment by the govern­ment that liv­ing with se­vere and pro­longed im­pair­ments is ex­pen­sive. It is not a di­ag­no­sis, nor is it pub­lic in­for­ma­tion. It is pos­si­ble that you could have im­pair­ments in one as­pect of daily life but are oth­er­wise high func­tion­ing. That is why it’s im­por­tant to read the CRA eli­gi­bil­ity guide­lines care­fully.

If you or some­one you care for suf­fers from a se­vere and pro­longed dis­abil­ity, com­plete the T2201 (Part A), have the ap­pro­pri­ate med­i­cal prac­ti­tioner com­plete Part B, and sub­mit the form to your tax ser­vices of­fice. More in­for­ma­tion can be found on the CRA web­site or by con­tact­ing a tax pro­fes­sional.

Part of an oc­ca­sional se­ries by Sab­rina DiFederico, CFA, CPA, CA, MBA, an in­de­pen­dent fi­nan­cial ad­viser with her own wealth man­age­ment prac­tice in Hamil­ton. She can be reached at sab­rina@man­aged­wealth.net

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