Disability Tax Credit
That bewitching time of year is here again. No, I am not senile. I know Halloween was months ago. I am talking about the nightmare hour of midnight April 30th or, in other words the tax deadline. The hour at which, those who have filed timely returns may go to bed with total peace of mind and a possible refund; while those who have not will be up all night trying to redeem themselves whilst the tax man calculates the penalty for their procrastination.
For those on Home Parenteral Enteral Nutrition (HPEN) there is some relief provided by the Disability Tax Act, albeit, a small consolation for all the trials and tribulations throughout the year, but, still something to ease the way a little.
This article summarizes the Federal Non-refundable Disability Tax Credit, which provides tax relief for Canadians with disabilities and how it may affect you as a HPEN consumer or a relative or dependent of a HPEN consumer.
History of the Disability Tax Credit
The Disability Tax Credit is a non-refundable tax credit which is applied to reduce the amount of income tax a person pays. You may be entitled to this if you have a severe mental or physical impairment which has lasted, or is expected to last, at least 12 continuous months and markedly restricts your ability to perform one or more basic activities of daily living.
The disability may be one that the individual was born with or one that has developed over time. It is the effect of the impairment on one’s ability to perform one or more of the basic activities of daily living, not the ailment or condition itself, which determines whether or not an individual can claim this credit.
In the past Canada’s Customs and Revenue Agency’s (CCRA) list of daily activities consisted of categories such as feeding, hearing, speaking, walking, etc. However, starting in the year 2000 (filed in 2001), the list was expanded to include persons who receive life sustaining therapy on an ongoing basis, which obviously includes HPN.
Individuals may qualify as receiving life sustaining therapies if a Canadian medical doctor certifies that they need such therapy at least three times a week for an average of 14 hours per week. The need for the therapy must have lasted, or be expected to last, for a continuous period of at least 12 months. Life-sustaining therapy does not include special programs of diet, exercise, hygiene, medication or implanted devices such as pacemakers.
Important Points to Consider
1. Employment status:
Unlike some disability benefits (generally private plans), the Disability Tax Credit does not require an individual to be unemployed or unemployable. So long as you meet CCRA’s definition of “a Life-Sustaining Therapy” or “a severe and prolonged …… physical impairment”, you qualify for the credit even if you are employed full-time.
This is the most misunderstood element of the credit, which results in many eligible people not applying for the credit. The credit is not considered a “wage replacement” benefit but rather provides some relief from the expenses, which occur due to a disability.
2. Defining Life-Sustaining Therapy:
3. Don’t Self-Eliminate ~ Apply and see:
Many consumers, after reading the criteria’s definitions, particularly before the Life-Sustaining Therapy clause was added, doubt that they qualify and decide not to apply. Never ever do that!!! It is your responsibility to provide full, accurate, truthful information but leave the interpretation of the regulations and the final decision to the CCRA.
4. Commencement of Qualification:
It is not required for an impairment to have existed for a full year in order to qualify. The qualifying period for prolonged impairment is defined by CCRA as ‘having lasted or expected to last at least 12 continuous months.
Your eligibility for the tax credit commences on the date your physician certifies on Form T2201 (Disability Tax Credit Certificate) as the commencement date of your impairment (not the date the form was completed). So if your physician completed the form and dated his\her signature on February 23, 2002 but entered the commencement date of your impairment as December 31, 2001 you would qualify for the tax credit for the 2001 tax year and from then on.
Note: If the impairment commenced even just one day before the end of the year, you qualify for that full year.
5. Status of Parenteral & Enteral Therapies:
Parenteral: If you require parenteral feeding, even if it is only for supplementary nutrition a few times per week, so long as you meet the life-sustaining therapy dedicated time requirements – “at least three times per week, to an average of 14 hours per week” and have been “undergoing or expect to undergo this therapy for at least 12 continuous months” you should expect to qualify for the credit.
Enteral: The situation for Enteral nutrition is not as clear cut. There is a possibility that enteral therapy may be considered a “special diet”. A lot depends on the nature of the therapy.
If the Enteral therapy is via a naso-jejunal (NJ) or naso-gastric (NG) tube or other such mechanism and the frequency and time criteria are met, CCRA will probably allow the claim.
However, if you use nutritional supplements orally some government and private health care plans have defined this as food. It is possible that CCRA will do the same regardless of how often or how long you have used this therapy. But, as stated above, if you feel you might meet CCRA’s criteria, file for the credit. You have nothing to lose.
6. Other Documentation:
Contrary to popular belief, it is not necessary to file a letter detailing when you became ill or your diagnosis, which your doctor will have already indicated on Form T2201. You do not need to state when or how many surgeries, hospitalization, etc. you have had. This information is irrelevant to CCRA who base their decision on your physician’s certification of your need for life-sustaining therapy on Form T2201
Any information concerning your future employment status and whether you receive any other disability pensions is irrelevant. The credit applies regardless of you employment status, tax rate, or any income you receive which, if taxable, will already be on your T1 Form.
Submit only the completed Form T2201 which has all the information that CCRA requires. Too much information can merely “muddy the waters” and delay the processing of your claim. If, for some reason, CCRA requires more information they will contact you.
7. Spouses & Dependents:
How to Apply
To apply for the Disability Tax Credit the need for life-sustaining therapy must be certified by a Canadian medical doctor using Form T2201 – Disability Tax Credit Certificate which must then be filed with your tax return.
The form will be reviewed to determine if you are eligible for the credit before your income tax return is assessed. For this reason, your tax return can not be electronically filed for the year in which Form T2201 – Disability Tax Credit Certificate is submitted.
If the requirement for the therapy is permanent, it is not necessary to file another T2201 in later years unless circumstances change or unless CCRA requests an update, which may occur approximately every 5-6 years.
If your physician certifies that the need for therapy exceeds 12 months but is temporary, a new T2201 must be submitted if the temporary period stated on the certificate has ended but the condition has continued. However, just as you may claim the credit for the year that the therapy started regardless of when during the year the therapy started; you can claim the credit for the year in which the therapy ends if it was temporary.
If this tax season is the first time you are filing for the tax credit, you must submit Form T2201 with your 2001 tax return even though your physician indicated that your life-sustaining therapy commenced years earlier. When you receive your 2001 assessment notice, if your Disability Tax Credit claim has been approved you may then, if the therapy commenced prior to 2001, file for an adjustment to your 2000 assessment by submitting Form T1-ADJ-01 – T1 Adjustment Request.
You need not submit another T2201 with you reassessment request, since your original T2201, already on file with CCRA, will have shown the earlier date. Do not file a reassessment for 2000 until you receive your 2001 assessment.
Not all people with disabilities will qualify for the credit. Just because you receive Canada or Québec Pension Plan disability benefits, workers compensation benefits, or other types of disability benefits, does not necessarily mean you will qualify for the Disability Tax Credit. These programs are based on other criteria, such as one’s inability to work.
Information and Resources
Information Concerning People with Disabilities – Includes Form T2201 (RC4064)
Interpretation Bulletin: Medical Expense and Disability Tax Credit and Attendant Care Expense Deduction
1-800-959-8281 (personal service)
1-800-267-6999 (automated TIPS)
1-800-959-2221 (to order forms)
Web Site: www.ccra-adrc.gc.ca/tax/individual/disability/index_e.html
In Person: From your local office, check the government section of your telephone book under ‘TAXES’ or visit CCRA’s website.