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NB Telegraph-Journal ~ The Bottom Line ~ Disability Tax Credit ~ April 10, 2006 - 09 Apr 2006 by TaxHelp
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The federal budget in 2005 introduced some long awaited changes for those who are disabled. The whole disability area has been a confusing one at best. If you are disabled, the tax laws provide a number of tax breaks designed to compensate you (or someone on whom you are dependent) for the extra expenses incurred as a result of your disability. Prior to 2005, the definition was “severe and prolonged mental or physical impairment”. For 2005 and later the subtle nuanced difference is “severe and prolonged impairment in physical or mental functions”.
People who have difficulty with mental functions necessary for everyday life should now qualify for the certificate. As well, those with multiple restrictions, where no one illness would normally be enough to qualify, will now be able to have the cumulative effect considered. This change alone is expected to allow the credit to be available to an additional 50,000 taxpayers. Finally, the time devoted to therapy will now weigh more heavily in the decision making process. As an example, this means that children with Type 1 diabetes should now qualify under the program.
In order to claim you must file Form T2201, Disability Tax Credit Certificate, with your return. This form, which must be completed in part by a doctor, or any of a broad number of specialists, enables the Canada Revenue Agency (CRA) to determine whether you meet the definition of "disabled."
Many of these certificates have been called into question by the CRA, over the past number of years. As a review if you are blind, or have a severe impairment which makes it extremely difficult or time-consuming for you to carry out the basic activities of daily living, you probably meet the definition of "disabled".
The impairment must last (or be expected to last) at least 12 months, and must severely restrict your ability to see, walk, speak, hear, or perform personal care activities (such as feeding and dressing yourself), or seriously affect your mental capacity to manage your personal affairs.
The fact that impairment affects your ability to work or perform housekeeping tasks, or restricts your social or recreational activities, however, is not necessarily relevant, nor is the fact that you receive a disability benefit, such as the one provided through the Canada Pension Plan. If you think you may meet the definition of "disabled," see a doctor or other qualified health professional that will evaluate your disability and complete the Disability Tax Credit Certificate for you.
In the case of children with disabilities, age and expected development must be taken into account. A one-year old child, for example, is severely limited in the ability to perform the basic tasks of daily living, whether they are disabled or not. However if the impairment is obvious or medically proven, a disability amount may be allowed. The new rules suggest that children with Type 1 diabetes will now qualify for the certificate, which then may be transferred as a credit to a supporting parent.
Assuming that you meet the definition outlined above, you are allowed to claim a disability amount of $6,596 federally and $6,386 provincially on the 2005 tax return. When the nonrefundable tax credit rates are applied, the credit translates into a combined federal - NB tax saving of about $1,600.
There is also a disability supplement for those under the age of 18 that is worth $3,848 federally and $3,725 provincially. This credit is reduced by child care expenses that may be claimed. There is also a supplement available for the child tax benefit that translates into a maximum additional payment of $2,300 per year.
The disability credit is a non-refundable tax credit, which means that any portion that can't be used to reduce your tax payable to zero is not refunded to you. However, you may be able to transfer the unused portion to someone else. This may be your spouse, if you are married or living common-law, or a parent, grandparent, child or grandchild on whom you are dependent.
Taxpayers who are claiming the disability amount for the first time may have to wait up to three months before their tax returns are assessed. As a result, some CRA agents are currently advising first-year claimants that they should file their tax returns without the disability amount and request an adjustment later.
Roger Haineault is with Help 4 Taxes. He can be reached with specific questions or suggestions by calling 506-693-1212 or by e-mailing him at roger@help4taxes.ca. His column appears Mondays. |
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