Disability Tax Credit 101 in Canada


How we help those with disabilities in Canada

The late, Roger Nielsen, former NHL coach and Hall of Famer knew the rules of hockey better than anyone. Once when an opposing team was awarded a penalty shot, Nielsen pulled his goalie in favour of a defence-man. When the opposing player picked up the puck, Nielsen’s defence-man rushed out and checked the unsuspecting player to save the goal. The opposing team was beside themselves, but there was nothing in the rules that said it couldn’t be done.

Having a strong grasp of the rules has never been more important; especially as they apply to the federal disability tax credit. Don’t count on Ottawa or the Canada Revenue Agency to give you a heads up or volunteer information critical to your understanding or qualification for this often misunderstood non-refundable tax credit. The DTC is the gateway to many federal and provincial disability programs including access to the generous Registered Disability Savings Plan. Legislation allows retroactive application of the credit for up to 10 years potentially yielding refunds in the tens of thousands of dollars.

The Disability Tax Credit should really be called “the effects of impairment tax credit”. The qualification criteria are primarily based upon the effects of the taxpayer’s impairment and not the diagnosis of their actual disability. This is often a source of confusion among the disabled. For example when one diabetic qualifies for the DTC and the next person with the same disability does not. It is all contingent upon the degree to which the disability impairs specific aspects of daily life.

One must simply be able to demonstrate with the available medical evidence that you are markedly restricted in one of the following areas of daily living: Sight, Speech, Hearing, Walking, Dressing, Feeding One’s Self, Elimination/Urination, and Thinking/Reasoning to qualify. The impairment must last or be expected to last at least 12 months. Life Sustaining therapies such as kidney dialysis are also covered. “Markedly restricted” means that you are restricted all of the time or substantially (90%) all of the time. Allowances are also made for those who do not meet the threshold for marked restriction but have a substantial restriction in at least two areas of daily living noted.

This poses specific problems for most physicians who are required to complete the Disability Tax Credit application. Firstly, physicians chart their respective patient’s diagnosis, treatment and the results of various medical tests. They don’t as a matter of course document the specific effects of their patient’s impairment. Secondly, they almost never record or report them in the “language of the legislation”, referring to the Income Tax Act. This is a crucial requirement of the adjudication process established by relevant legal precedent. Regretfully, you won’t find this information anywhere in the instructions. This likely explains why the majority of qualified self-applicants are denied.

The CRA will often recommend that the disabled self-apply for the DTC. This is somewhat reminiscent of a car accident victim being counselled by an insurance adjuster to negotiate a settlement directly with the insurance company without the benefit of a lawyer. It usually does not end well. Unless you have a strong legal or accounting background, it is recommended that you utilize the services of a professional to guide you through the DTC application process. The DTC appeals process can be complicated and costly if you are denied.