Last summer, the federal government passed the Disability Tax Credit Promoters Restrictions Act. A piece of legislation intended to “better protect disabled Canadians from the predatory practices of some disability tax credit promoters.” In addition to providing increased protection to disabled persons from unscrupulous consultants, the Act has been instrumental in starting a much-needed conversation regarding disability benefits.
For instance, in advance of establishing the new regulations the Ministry of National Revenue launched an inclusive consultation process regarding the simplification of the disability tax credit (DTC) application procedure. The consultation process provided a forum for hundreds of disabled persons and other interest groups to share ideas on how to improve access to this much-needed – and often underutilized – tax credit.
What is the Disability Tax Credit?
The Disability Tax Credit (DTC) is non-refundable tax credit designed to help free up funds for Canadians with disabilities and their caregivers. In order to qualify for the credit, individuals must be a Canadian Citizen, have had a physical and/or mental disability for a minimum of 12 consecutive months, and have had that physical or mental disability certified by a doctor.
It’s important to note that before including the tax credit in your return, the Person with Disability (PWD) must first apply for the DTC and be approved by the CRA. It is not a tax credit that you can merely check off on the date that you file.
The benefits of receiving the DTC are extensive and include:
- Reduced future taxes for the PWD or an eligible family member/caregiver.
- Eligibility to open a Registered Disability Savings Plan (RDSP).
- Enhancements/Entitlements to other tax credits and deductions.
Registered Disability Savings Plan
In a past post, we mentioned the Registered Disability Savings Plan (RDSP) and briefly described how it can provide a boost to the financial security of disabled persons. We decided to briefly visit this topic again as the RDSP can be beneficial. The What and the Why (and a bit of the How) is explained in the video below and you can find even more information on the Plan RDSP website.
In short, the RDSP is a Canada-wide matched savings plan uniquely designed for individuals with disabilities. Essentially, the federal government will match the amount of money that a disabled person is able to save in order to help them prepare for their retirement, provide additional funds for unforeseeable calamities, and generally help lighten the burden of future care that understandably tends to cause so much anxiety for disabled persons and their families.
Benefits of an RDSP include:
- For every $1 put into an RDSP account, the federal government can (if your family income is below $87,123) match it with up to $3.
- For people living on a low-income (less than $25,356), the federal government will put in $1000 each year for 20 years.
- For people living on an income between $25,356 – $43,561, they can still receive a partial bond.*
Recent Changes to the Disability Tax Credit
In addition to the new regulations regarding The Disability Tax Credit Promoters Restrictions Act, there are a few other changes to the DTC that will affect disabled persons this year.
First, the cost of service animals for people with severe diabetes and the cost of designing personalized therapy plans, both now qualify as eligible medical expenses.
Second, individuals who qualify for the DTC will no longer have to pay GST/HST on the design of training plans, hospital parking and electronic eye wear.
For more information on these changes and for up to date information on the DTC, you can visit the Canada Revenue agency website at www.cra-arc.gc.ca/disability.
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