Help – I can’t claim the Disability Tax Credit!
Did you know you can transfer any unclaimed Disability Tax Credit amounts to a family member?
Sometimes when our clients are approved for the Disability Tax Credit (DTC), they may not claim the entire approximate $1,700 for the year, simply because that amount exceeds the amount of income tax they paid for the year they are claiming the DTC.
Instead, they may claim only a portion of that $1,700 (however much they have paid in federal and provincial income tax), and transfer any unclaimed Disability Tax Credit amounts to a qualifying family member.
For example, let’s say that our friend Bob was approved for the Disability Tax Credit for the last 10 years, and has been paying approximately $500 in federal and provincial income tax every year.
Bob cannot claim the entire approximate $1,700 annual maximum DTC amount because that amount exceeds his $500 of income taxes paid per year. Bob can only claim $500 of the DTC for every year he was approved the DTC – no more. That means the remaining $1,200 per year sits unclaimed.
That unclaimed Disability Tax Credit does not have to go to waste. If Bob came to us for help, we would notice that he had unclaimed Disability Tax Credit amounts that could be transferred to a family member who supported him.
Bob’s son Steve visits every other weekend and has been bringing a few bags of groceries at his own expense for five years. In this scenario, Steve has a good paying job and is able to claim his father’s unused $1,200 Disability Tax Credit on his own taxes retroactively.
The NBA would help establish that Steve is a suitable sponsor, meaning Steve could receive a $6,000 refund – $1,200 for every year Steve bought his father groceries. Steve does not have to pay tax on that $6,000,as you don’t pay tax on a tax refund.
Further, as long as Bob cannot claim his full DTC benefit, and for as long as Steve continues to help him, Bob can continue to transfer the unused portion to his son in future years.
Members of a family help each other – that’s what families do, without a second thought of quantifying that help. From our example above, Steve bought groceries, but if instead he helped with the rent or the mortgage, or if he took his father clothes shopping as the seasons changed (eg. buying his father a winter coat), those things might meet the threshold, too.
There are other forms of help that wouldn’t qualify for a Disability Tax Credit refund. Steve bought his father a car because of Bob’s mobility issues but, as generous as that was, it probably wouldn’t qualify. Transportation doesn’t fit within the food, clothing, or shelter guidelines.
The Disability Tax Credit was designed so that when the money cannot help the disabled person directly, it can at least assist family members who take care of them. Family members eligible for transferring the Disability Tax Credit includes a spouse, son or daughter, father or mother, brother or sister, aunt or uncle, niece or nephew, grandmother or grandfather, or grandchild.