What is the Disability Tax Credit

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The Disability Tax Credit is a non-refundable tax credit that helps reduce the amount of income tax people with impairments or their supporting family members may have to pay. It was introduced in 1988 by the Canadian Government and Canada Revenue Agency (CRA) to recognize the additional expenses associated with having a severe and prolonged impairment.

Those who qualify for the DTC can either receive the program’s base amount or the base amount plus a supplemental amount. The base amount is for eligible adults aged 18 or more. The supplemental amount is for people who are under the age of 18 as of the end of the applicable tax year. So, eligible people under age 18 can get both the base and supplemental amounts. Those who were eligible in past years but didn’t claim the credit can also back-file it for up to 10 years and receive the full credit for each year.

Although the DTC is a federal tax program, the credit comes from both federal and provincial sources. In other words, you will receive an amount from your province of residence and an amount from the federal government. These provincial amounts vary from province to province, while the federal amount is the same across the country.

Why is the DTC Important?
Many people aren’t aware that a DTC approval can open many doors and allow you to apply for other federal, provincial, and territorial programs. These programs include the registered disability savings plan, Canada’s workers’ benefit and the child disability benefit. These programs cannot be accessed without qualifying for the DTC.

On top of that, the DTC is designed to reduce the amount of income tax you pay. So, getting approved could save you some money on your next tax return. Overall, the DTC is meant to benefit you, so applying is something you should consider if you are eligible for the program.

Can I Work and Receive the Disability Tax Credit?
Unlike many other disability programs in Canada, you can work and receive the DTC. Remember, the program doesn’t focus on your ability to work. Instead, it focuses on the severity of your medical condition and how it affects your ability to do the basic activities of daily living.

For example, someone who is blind automatically qualifies for the DTC. However, many blind individuals are still able to work even though they are eligible for the program.

How Much Does the Disability Tax Credit Pay?
The Disability Tax Credit does not pay a monthly or annual benefit like other disability programs. Rather, it allows you to get a tax refund, if you have paid taxes to Revenue Canada that have not already been refunded to you.

For example, if your income is below $14,398 then you likely do not have to pay income taxes in Canada. Or if you pay taxes, you will receive a full refund when you file your tax return. In this situation, the Disability Tax Credit would not result in any payment to you because there are no un-refunded taxes being held by Revenue Canada.

On the other hand, if your income was $18,000 in 2022, then you would owe approximately $181 in federal and provincial income tax if you live in Ontario. Revenue Canada is holding $181 in un-refunded taxes. If approved for the Disability Tax Credit, you would get a tax refund for some or all of the $181. But $181 is the maximum amount you could get from the Disability Tax Credit for yourself. In this case you would be eligible to receive further refund if it was available, but there are no taxes beyond the $181 to refund.

If you haven’t paid taxes or you don’t need the entire credit to reduce your income, then you can transfer your credit to a supporting family member. This can be your spouse, child, grandchild, parent, brother, sister, uncle, aunt, niece, or nephew. To qualify as a supporting family member, you must depend on that person for one of the basic necessities of life (food, shelter, clothing).

The amount you, or your supporting family member, will receive depends on many factors, so we can’t provide you with an exact number. However, an adult can expect to receive anywhere from $1,500 to $2,500 per year of eligibility. And a child may receive between $3,000 to $4,500 per year of eligibility. This figures assume that you and/or the supporting family member have paid income taxes in excess of the above amounts.

If an adult is eligible for the 10-year retroactive refund, they can expect to receive between $15,000 and $25,000 in a lump sum amount. And if a child under 18 is eligible for the 10-year refund, they can expect to receive between $30,000 and $45,000. Again, this payment would only happen if you, or your supporting family member, paid in excess of $2,500 to $4,500 in taxes in each of the retroactive years.

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