The Disability Tax Credit, what is it really?


Providing for a lifetime

The Disability Tax Credit, what is it really?

September 2019

The Disability Tax Credit (DTC) plays an instrumental role in the lives of Canadians with Disabilities, so why are only 40% of eligible Canadians taking advantage?  Primarily designed to recognize the higher costs faced by those living with a disability, the credit provides tax relief in the form of a non-refundable tax credit.  However, the program has more recently become the eligibility criteria for other extremely valuable government programs such as the Child Disability Benefit (CDB) and the Registered Disability Saving Plan (RDSP).  Further, it serves as a crucial source of information for social policy, disability advocates, and for program delivery and design by Non-government organizations and government organizations alike.  I encourage you to consider the significance the DTC could play in the lives of the people you support.

The credit dates back to 1944, created to address the needs of those with severe vision loss in Canada, and was later expanded to include individuals with severe disabilities.  During tax reform in the 1980s, it became a non-refundable credit, as it remains today.  Non-refundable status indicates that it will not generate a refund for its claimant, but rather it reduces tax owing.  If you are not in a taxable position, as many with severe disabilities are not, the application of the credit has seemingly no benefit to you.  However, the credit can be transferred to a caregiver, such as a parent, and be claimed.  The non-refundable status of the credit is one possible factor contributing to the lower utilization of the credit, particularly in adults with disabilities.  Many families are unaware of its transferable status, and more importantly unaware of the many other benefits aside from tax relief that it provides.

The DTC also serves as an entry point for other government programs, the Child Disability Benefit and the Registered Disability Saving Plan.  The CDB provides a monthly tax-free payment to eligible families supporting a disabled individual under age 18.  For the period of July 2019 to June 2020, there is the potential to receive up to $2,832 ($236.00 per month) for each child who is eligible for the DTC.  The RDSP offers up to $90,000 in government grants and bonds towards the long term financial security for persons with disabilities.  An acute lack of awareness surrounds these benefits and a greater gap exists in recognizing and understanding their affiliation with the DTC.

The application process for the DTC, which is administered through the CRA, is complex and cumbersome.  Eligibility criteria are unclear and fraught with subjectivity and there is an inherent lack of consistency in the assessment of eligibly.  This has led to confusion for health care professionals, families, caregivers, and people with disabilities themselves when considering their potential qualification and applying for the DTC.  The application process and eligibility criteria are main focus points for the Disability Advisory Committee which was recently reinstated in November of 2017.  In the DAC report released earlier this year, the committee made 41 recommendations to improve the DTC program.

I’d like to acknowledge that I feel fortunate to live in a country that has a program like the DTC which recognizes the potential financial impacts of living with a disability.  At the same time, I have experienced and frequently encounter many challenges in accessing this vital measure for Canadians with a disability.   There are wide-ranging concerns and potential solutions.  Clarifying eligibly criteria is a significant starting place for reducing barriers.  Decoupling the DTC from other benefits, such as the RDSP and switching administration of the program from the CRA to ESDC Employment and Social Development Canada have also been proposed by some policy groups. I have included links to the various policy papers available on the DTC, including the link to the Disability Advisory Committee’s recent report and recommendations.

If you are not currently eligible for the DTC and are uncertain whether this program could benefit you or someone you care about I encourage you to explore your options and the role the credit could play in strengthening your current situation and creating a secure future.

IG Wealth Management_Audrey Veltri

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