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How does the Disability Tax Credit help families of children with disabilities?

April 26, 2017
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Finding the proper care and assistance for children living with disabilities can be daunting and special day cares, schools, or treatments can become costly – resulting in mounting debt or concern for finances.

Consider that some children with disabilities may qualify for the Disability Tax Credit (DTC) – a non-refundable tax credit meant to assist people with physical or mental restrictions. When claimed, the DTC can result in a significant tax refund.

What is the Disability Tax Credit worth for families with children?

The maximum Disability Tax Credit amount for a child is $50,000 – though keep in mind that DTC amounts vary based on hundreds of combinations of factors, including income tax paid by the family member claiming the DTC, province of residence, the family’s participation in certain financial government programs, etc.

Any person who qualifies for the DTC is entitled to receive up to $20,000 retroactively on past income taxes paid (up to 10 years). Additional amounts available for children (like the Child Disability Benefit) result in a maximum entitlement of up to $50,000.

Sometimes, families don’t realize that more than one income earner can claim the Disability Tax Credit. In fact, any number of eligible family members could transfer and claim the DTC.

Additional Disability Tax Credit benefits for children

The cost of special schools, tutors, day cares or treatments may produce challenges for families to plan for their child’s future financial security. However, once approved the DTC, families can start an RDSP – a matched savings plan where for every $1 put into the RDSP account, the federal government may match up to $3 as part of the Canada Disability Savings Grant!

Those who live on low-income (less than $30,000) may be eligible for the Canada Disability Savings Bond, in which the federal government will put in $1000 per year in your RDSP, for up to 20 years.

Some individuals may require restrictive or special diets, for example those with Celiac disease. Once approved the DTC, families may claim certain dietary products as medical expenses.

If a family makes renovations in their home to make it more accessible for their child, they may claim the Home Accessibility Tax Credit – worth 15% of up to $10,000 of eligible home renovation expenses (including costs related to wheelchair ramps, walk-in bathtubs or wheelchair elevators).

Families can make use of these additional benefits – but only after becoming approved for the Disability Tax Credit.

How can a child qualify for the Disability Tax Credit?

There’s really no such thing as a medical diagnosis for “disability” – and the Canada Revenue Agency (the government authority that determines who qualifies for the DTC) lays out who qualifies for the DTC:

  • Does your child have a restriction in a basic activity of daily living (BADL) – either walking, feeding, mental functions, vision, dressing, hearing, eliminating or bowel/bladder functions, or requires life-sustaining therapy?
  • Is this restriction marked or significant – either the restriction lasts for at least 12 months continuously and takes at least 3 times longer than normal to perform the BADL, or there are more than 1 restricted BADLs that are affected 90% of the time.

This means any condition that a qualified medical practitioner certifies with the above criteria may qualify for the Disability Tax Credit – granted that the Canada Revenue approves one’s application.

So there’s a lot of room for interpretation – and sometimes misinterpretation – by all parties involved in the DTC process.

If you’re considering how the Disability Tax Credit applies to your situation, and have any questions about the application process, schedule a call with us and we’ll tell you how it works.

For more information about the DTC, please visit our dedicated information page here.