DONATE

The disabIlity tax credit and canada caregiver tax credit = $3,000 tax refund

The availability of non-refundable tax credits for disability under the Income Tax Act has changed in recent years. This Alert reviews the disability tax credit (DTC) and the Canada caregiver credit (CCC) which are often available at the same time. In many cases these credits are left unused but if so can be claimed for up to ten years back once they are discovered. Also, the DTC can usually be transferred to a supporting family member if not useable by a taxpayer with little or no income.
The tax refund you will receive will depend on the tax rate in the province where you live but a 20% rate is reasonable for the tax refund calculation. The DTC would provide about a $1,700 tax refund to taxpayers and the CCC would provide refund of up to $1,400 to caregivers. That is about $3,000 in total or a potential tax refund of $30,000 for ten years if overlooked.
DISABILITY TAX CREDIT (DTC)
The DTC offers a tax credit for anyone markedly restricted in carrying on certain activities of daily living, who lacks eyesight capability or who needs for life sustaining therapies. Set out below are the qualifying challenges.
PHYSICAL CHALLENGES
  • Feeding oneself
  • Dressing oneself
  • Walking
  • Hearing
  • Eliminating bowel or bladder
  • Speaking
  • Seeing
MENTAL CHALLENGES
  • Memory
  • Executive functioning – problem solving, goal setting and judgement together
  • Self-care
  • Personal safety
  • Social interaction – initiating and responding
  • Transactional ability
The inability to work is not on the list although it could qualify because of disabilities relating to executive functioning, social interaction or personal safety.
The DTC for mental activities is more difficult to prove because it is hard to show the existence of an invisible or periodic disability. The tests for the DT are applied based on the usual expectancies of others of the same age. A person who is significantly restricted in two or more activities so as to be markedly restricted in one activity also qualifies for the DTC.
Availability of the DTC depends on the inability of a person to carry on the specified activities of daily living listed above. It is not based on the medical diagnosis but rather on the outcome of the medical diagnosis on daily living. Canada Revenue Agency (CRA) tests the inability to do physical activities by the time it takes to do them whereas qualification for mental activities is based on an ongoing need for care and supervision.
DTC TRANSFER WITHIN THE FAMILY
If a tax refund from the DTC is not available because the person doesn’t pay any income tax, chances are that the credit can be transferred to another family member who can use the credit for a tax refund. The transfer is available if the person lives with you or if you supply the necessities of life on a regular and ongoing basis.
DTC – ESTATE PLANNING AND OTHER BENEFITS
This disability tax credit is so important and yet so overlooked. It provides a tax credit providing the following conditions are met.
  • The ability impairment is severe and prolonged.
  • The ability impairment results in a marked level of restriction to daily living.
  • The ability impairment is certified by a medical practitioner and approved by CRA.
The DTC has no income levels that restrict use of the credit. It is a prerequisite to many other important tax benefits for disability including the following:
  • Registered disability savings plan to accumulate disability capital
  • Attendant care tax credit especially for the elderly in nursing and retirement homes
  • Qualified disability trust in your will for a family member that is eligible for graduated tax rates and ownership of a home
  • RRSP, RRIF and pension fund transfers in your will to RDSPs and RRIFs of a beneficiary with a disability
As you can see, these are significant tax benefits to families both in their retirement and estate planning,
CANADA CAREGIVER CREDIT (CCC) QUALIFICATIONS
The CCC is available if you support a spouse, partner, eligible dependent, child or other family who is infirm because of a physical or mental impairment. As we will see below, there are in fact two credits that are available – $7,000 (rounded) and one for $2,200 (rounded), you may be eligible for either or both of them with different income thresholds for each. Family members under age 18 are restricted to the $2,200 credit. Other family members including parents, grandparents, brothers, sisters, aunts, nieces, or nephews must be infirm to qualify for the $7,000 credit.
The credit is available for family members who because of a physical or mental impairment depend on you for support regularly and consistently for the basic necessities of life such as food, shelter and clothing.
CAREGIVER TAX CREDIT HISTORY AND BENEFITS
There were different credits with different rules until the end of 2016 before the Canada caregiver provision came into existence in 2017. Until then, the credit was allowed if you were looking after someone in your family in one of the following situations:
  • Caregiver – $4,700
  • Infirm dependent – $6,800
  • Family caregiver – $2,100
Before the caregiver rules were overhauled starting in 2017 there was 1) an infirm credit for infirm dependent adults, 2) a caregiver credit for parents or grandparents (not necessarily infirm) and 3) a family caregiver credit for family members under 18. The infirm dependent credit was reduced if the person’s income exceeded about $6,800 and the caregiver credit was reduced if income exceeded about $16,000. You could only claim one of these tax credits.
In 2017 and later years these credits were replaced by the Canada caregiver credit (CCC) of $7,000 for a spouse or partner, eligible dependent or other infirm adult family member and $2,200 for family members under age 18.
You can claim the CCC depending on the income of an infirm dependent. The credit of about $7,000 is claimable for most adult family members with a base income of about $16,000 and the $2,200 credit has a base income amount of about $12,000. The credit is reduced dollar for dollar when income of the person being cared for exceeds the base.
SUMMING UP
It is not possible to discuss these two tax credits in a short article in nearly enough detail. However, I can tell you that thousands of dollars in such credits are overlooked every year so maybe this Alert will help you and your family get its proper share.

Funding for this website provided by Ontario Trillium Foundation

Charitable Registration No: 10799 9310 RR0001

© 2022 HYDROCEPHALUS CANADA. All Rights Reserved