Disability Tax Credit (DTC) – Everything you need to know
The DTC can help Canadians with disabilities get the tax benefits they need. The Canada Revenue Agency has a process to help people with disabilities and their families apply for this valuable tax credit. Here are some things you should know about the disability tax credit:
What is the DTC?
The DTC is a non-refundable tax credit available to people with severe and prolonged mental or physical impairment who are eligible for the DTC for the year in which they apply. The DTC is calculated based on an individual’s net income, but there is no upper limit on how much you can earn before you are no longer eligible for the DTC.
If your expenses related to this impairment are more than $10,000 per year, you may be able to claim these costs as medical expenses under certain circumstances. These costs need only be reasonable, necessary and incurred by you or someone else as a result of treating your condition or illness; however, they must not have been reimbursed by another person or organization.
What are the Eligibility Requirements for the DTC?
To be eligible for the DTC, you must:
- Have a severe and prolonged impairment in physical or mental functions
- Be eligible for the disability tax credit for the year. For example, you must also meet all other conditions listed on Form T2201, DTC Certificate (for 2016 and earlier years). In addition, your medical practitioner must certify that your impairment is expected to last at least one year; or that it may reasonably be expected to last one year.
- Have filed a tax return for that particular year.
How can you claim DTC?
You can claim the DTC by completing form T2201 and attaching it to your income tax return. You must have a valid social insurance number and a valid medical certificate, and you must have received a DTC certificate from CRA. You must meet these requirements to file for the DTC.
Is the DTC refundable?
The DTC is not refundable. A non-refundable tax credit can reduce your income tax to zero, but you won’t get any money back at the end of the year.
Suppose your federal taxes are less than your total credits. You can carry those unused amounts to future years or claim them as part of your provincial or territorial non-refundable credits. You can do this by completing Form T1213: Statement of Disability Programs Receipts and Expenses, which is included with the federal form called Schedule 2 – Federal Tax Credits.
You can claim the DTC for the previous year or the current year. You can also claim it for a future year if approved for DTC; your impairment is expected to last 12 months or more.
Suppose you’re eligible for DTC, as long as your medical practitioner hasn’t certified that your impairment will end before Dec 31 of any given calendar year (such as March 30). In that case, you can receive a refund from CRA by filing Form T2201 DTC Certificate.
The disability tax credit is a great way to save money on your taxes. It’s also an excellent resource for those seeking financial support because they suffer from a disability or illness. If you think you might be eligible for this benefit, you can speak with a tax professional to find out more information about how it works and whether or not it could help.