The Disability tax credit

No one wants to be sick or have a disability


No one wants to be sick or worse not being able to help themselves. The cost of tending to aging parents, dependent children and spouses, probably runs into the millions, not to mention the cost to loved ones and family and those who have to take care of them.

Over the years successive governments have introduced various credits to ease the burden.

Disability Tax Credit is a non refundable credit available to eligible taxpayers and their dependents. In order to be eligible the claimant must have a severe and prolonged impairment, usually medical in nature but can also be psychological.The impairment must markedly prevent a person from taking care of himself or cause difficulty in performing the normal activities of everyday living.

To be eligible a  form T2201 must be signed by the attendant physician and CRA approves it. This certificate usually remains on your file for 5 years. The CRA may request renewals of this certificate to ensure continued eligibilty for the credit. Failure to have a valid certificate on file could make you lose the tax credits.

 The caregiver tax credit is not as stringent in its requirements but the credit is for a lesser amount. There should also be some proof of the relationship when requested.

These tax credits may be transferred between spouses and also from dependent children to parents. When filing as a family it might be better to maximize the credits on the spouse with the higher income.

The new RDSP allows families to save  monies on a tax free basis. No tax deductions are allowed for the contributions neither are withdrawals of contributions included in income. To qualify you must be a resident of Canada, Eligible for the DTC and be under 60 years old. There is no annual limit to contributions up to a $200,000 lifetime limit. There is also the advantage  that any one can contribute to the plan with the written consent of the plan holder.

The government may also pay a matching contribution up to $3500 with a Canada Disability Savings Grant and Bond. The Canada Bond is payable to lower income earners and can be paid into the plan whether a contribution is made or not. Grants, bonds and investment income are included in the income of the beneficiary when funds are withdrawn. The taxpayer may therefore want to withdraw the contributions first and leave as much of the investment income in the plan as possible to minimize taxes.

More on disability tax credits. Related Topics

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