Filing taxes: What you should know if you have a disability
It’s that time of the year; tax season. So let's talk taxes. A boring, confusing, and sometimes scary undertaking, doing your taxes is an annual inconvenience, but an important one. This can be especially true for people with disabilities who may need to provide additional forms and medical paperwork to apply for specific tax credits.
We’ve asked David Muir, a disability tax credit specialist, to share some helpful advice for people with disabilities and their families in advance of the 2015 tax season deadline.
The Canadian Revenue Agency and You
Many Canadians are fearful of the Canada Revenue Agency (CRA) and to avoid it, they won't even file a return! But taxpayers with disabilities may qualify for a number of tax credits and benefits, and parents of children with disabilities benefit even more from our tax system. If you don’t file, this could mean potentially passing up thousands of dollars in benefits and returns. CRA has many provisions set up to help those with disabilities, so it’s extremely important to file your taxes every year.
The secret is to file and to file ON TIME. Late taxes are subject to an automatic five per cent penalty on any unpaid tax, plus an additional one per cent per month on the owed amount for each month the return is late, for up to 12 months.
In addition to common deductions like childcare expenses, child tax benefits, spousal RRSPs, etc, there are many credits and deductions that are relevant to persons with disabilities and their caregivers. Applying for the following tax credits will help you complete your tax return and save you money.
Disability Tax Credit
The most important credit is the Disability Tax Credit. It is a non-refundable tax credit (amounting to $7,899 in 2015) that can be used to reduce the amount of income tax one has to pay, and includes a supplement for children under 18 (worth $4,607 in 2015).
Take this online quiz to see if you may be eligible for the Disability Tax Credit.
Be aware that a medical professional has to complete and sign the T2201 Disability Tax Credit Certificate and then it has to be approved by the CRA.
If you can't take advantage of the Disability Tax Credit, it may be transferred to a family member (spouse, common-law partner, parent, child, brother, sister, aunt, uncle, nephew or niece). The key to making this claim is that the person on whose behalf it is made must be "dependent on the taxpayer for support."
Note: Your old tax returns can be reassessed as far back as 10 years to claim this credit.
Medical Expense Credit
The Medical Expense Credit is a non-refundable tax credit that can be claimed for many medical related expenses such as: travel expenses, health care services, drugs, home renovations, dental services, and health insurance.
Travel costs to and from medical treatment may be included for those travelling more than 40 kilometres each way. And, people who travel more than 80 kilometres each way may be able to claim expenses for food and accommodation.
Caregiver Credit
You can claim the Caregiver Credit if you have a dependent who:
- He or she was 18 years of age or older
- He or she was dependent on you due to an impairment in physical or mental functions or, if he or she is your or your spouse's or common-law partner's parent or grandparent, was born in 1950 or earlier
- He or she had a net income in 2015 of less than $20,343 ($22,436 if he or she was eligible for the family caregiver amount, see below)
Family Caregiver Credit
The Family Caregiver Credit is for those who have a dependent with an impairment in physical or mental functions, you may be eligible to claim an additional $2,093. The dependent must be:
- A person 18 years of age or older and dependent on you because of an impairment in physical or mental functions; or
- A child under 18 years of age, with an impairment in physical or mental functions. The impairment must be prolonged and indefinite and the child must be dependent on you for assistance in attending to personal needs and care when compared to children of the same age.
The CRA may ask for a signed statement from a medical practitioner showing when the impairment began and what the duration of the impairment is expected to be.
Child Disability Credit
The Child Disability Benefit is a tax-free benefit for families who care for a child under age 18 who is eligible for the disability tax credit.
A key thing to note for parents is to ensure that if one of you is a stay-at-home parent and doesn’t earn an income, you must still file a return. This is important because the government looks at both parents’ returns to determine eligibility for the Child Disability Benefit.
Disability Supports Deduction
The Disability Supports Deduction is for individuals who have a physical or mental impairment and have paid for certain medical expenses. You can also claim and deduct the expenses that you incurred in order to work, go to school or do research.
Working Income Tax Benefit
The Working Income Tax Benefit is for low-income individuals of families who have earned some income from employment or business. It is designed to encourage Canadians with disabilities to enter and stay in the workplace.
Home Buyer’s Tax Credit
The Home Buyer's Tax Credit allows people to claim an amount for a home purchased for the benefit of someone with a disability. You also may be able to apply for a refund on your gas and be exempt from the GST/HST or duty on a number of goods and services.
The CRA tax code contains a number of provisions that can ease the tax burden of those living with a disability or those living with someone with a disability.
David Muir is the CEO of Disability Dreams Group Inc., a firm that specializes in financial planning for people with disabilities. Their personal process can help you with the Disability Tax Credit, Registered Disability Savings Plan, Provincial Government Support Programs, Estate Planning, and more.
