Have you heard about the disability tax credit or DTC? If you’re like most Canadians, you probably haven’t. However, it’s a fantastic tax benefit for those living with disabilities, and it can help you with potentially thousands of dollars a year each year if you or a family member qualify.
However, there is a glaring issue. By the CRA’s own estimates, only about half the people who could qualify for the DTC actually have it. There are some reasons for this, which we’ll get to but here’s the process for applying for the disability tax credit:
- Find the disability tax credit application form
- Go to a medical practitioner and have them fill out, and sign off on the form
- Fill out personal information and submit
- Wait for approval
- Claim the amount on your tax forms
Okay, that might seem pretty simple, but there are a few challenges you could encounter. Based on our experience, let’s take a look at some of the problems that can crop up:
- Difficulties are apparent in the very first step. We’ve talked to a lot of people with disabilities and we’d estimate maybe 20% have actually heard about the disability tax credit. Less have applied for it and even less have been approved for it. Even though the DTC is a great benefit, people just aren’t getting the information. Now that you have it, start by downloading the form on the Canadian government’s DTC page.
- You have to work with a medical professional to fill out their portion of the form. Doctors and other medical professionals are great at taking care of our physical and mental health. However, their realm of expertise is not in financial planning or tax advice. Usually, that’s a good thing. You definitely want your doctor focusing on their speciality, but when it comes to the form, it poses a challenge. We’ve heard from our clients that they want to apply for the DTC but when they bring the form to their medical practitioner, the doctor doesn’t know exactly what to write, or how to fill out the form. Simply put, the medical practitioner’s role in this case is to certify that their patient is indeed experiencing a disability, which results in a decreased quality of life. Unfortunately, there are some “fuzzy” guidelines in terms of what “really” qualifies for a disability, according to the federal government; as a result, there’s a certain art to filling out the form to best describe your symptoms accurately in a way that presents you or your family member correctly. That’s something we can help with.
- Challenges from the CRA Simply applying for the DTC is only the beginning. After several months, you’ll get a reply back telling you whether the application has been declined or approved. If approved, it may only be for a certain number of years, and if declined, you can choose to appeal, which is an entire process all over again. On top of that, they expect you to adhere strictly to the guidelines of what sort of impairments can qualify for the DTC.
- Receiving the appropriate amount of tax credits, or money back, can be difficult. This can sometimes be a challenge because even though you or your family member may qualify for the DTC, you still have to actually claim the amount on your taxes. Additionally, there are other benefits you can claim if you qualify for the DTC. In addition to that (yeah, a lot of additions), you’ll have to go through more paperwork if you want to claim amounts from previous years where you’ve qualified for the DTC. You’ll need to do some careful calculations to make sure you’re getting what you deserve. Here’s where a financial professional like Prometheus Private Advisory Group or your accountant can help you calculate how much you should receive back.
- What should you do with the money? There are different options for what to do with the money that you claim back from your taxes thanks to the disability tax credit. The most important thing is to have a plan. For example, if this is for your child, you may want to start a disability savings plan for them. Or, you may want to use it to pay for additional therapies now. Regardless of what you choose, have a plan in place so you can make the best use of the money. Talk to your financial planner and work with them to find the best solution for you and your family’s situation in a holistic way by taking into account all factors of your finances.
As you can see, although seemingly easy at first glance, there are things along the way that can potentially make the process complicated. There are resources, however, to guide you. Start by visiting the CRA’s webpage on the disability tax credit to learn some basic info. Next, talk to professionals who can help you with your overall finances. At Prometheus, we can help you with your financial process. You deserve to have these tax benefits. Remember, they were created just for people in your situation, so take advantage of it!