What is a Disability Tax Credit?

There are various government-sponsored assistance programs available for individuals with disabilities. These programs come in different forms—some provide income, others cover medical costs—but this video will focus on a program that offers a unique benefit: the Disability Tax Credit, or DTC.

The DTC isn't a direct payment to the disabled person. Instead, it allows taxpayers to claim a reduction on their income tax that might otherwise be owed on net earnings, regardless of the source of those funds. Essentially, it reduces the amount of income tax payable, which could either mean no further outlay of cash or potentially a refund from taxes already paid.

To apply for the DTC, Form T2201 needs to be completed by the disabled individual and their main doctor. Once this form is submitted to the Canada Revenue Agency, their service team will review the application to determine if the applicant meets the legislative criteria for approval.

An important aspect of the DTC is that if the disabled person's own income doesn't exhaust the approved credit, a supporting person may be able to claim the remaining amount. However, it's crucial to understand that there is no cash refund provided in lieu of the full credit.

Additionally, if a taxpayer is approved for the DTC, they may be eligible to apply this deduction to taxes filed in previous years, potentially generating a refund. Once you receive approval for the DTC, it’s important to ensure that the approval is registered with the CRA. You must also be sure to fill in the appropriate lines on the tax forms and check the applicable boxes on the tax forms.

Not only will this apply to income tax filings going forward, but depending on the dating of your certificate, as noted above it may be used to reassess past filings and result in a refund.

If you have any questions about the information provided in this video, please do not hesitate to contact your Client Services Team at Share Lawyers. We would be pleased to help you.