Before we get into the holiday season… which leads us into the New Year and tax time, I thought it a good idea to think ahead so you could be prepared. I’ve posted this article before, but it never gets old!!
At this time of life, many of you are caregivers for an elderly parent, or possibly even a spouse with health compromises, or perhaps your own health is no longer optimum. When I was primary caregiver for my mother, I dreaded tax season for both of us… until I took some training in tax preparation and saved us both a lot of money. I was listening to talk radio recently and discovered that a tax credit I thought was common knowledge is in fact a well-kept secret.
Here are two questions to answer before I start:
- Do you (or your loved one) pay taxes?
- Do you (or your loved one) have some impairment in physical or mental functions?
If you answered yes to both these questions, I recommend you keep on reading.
The Canadian government (Canada Revenue Agency) allows a tax credit for any individual who has a prolonged/permanent impairment in one or more specific areas. This impairment must be acknowledged by a medical practitioner and you are responsible for any fees that practitioner levies. Instead of rewriting the qualifications here, I am giving you the link to the Disability Tax Credit Certificate: http://www.cra-arc.gc.ca/E/pbg/tf/t2201/t2201-12e.pdf
The Disability Tax Credit (DTC) was implemented in 1988 as a non-refundable tax credit. “Non-refundable” means that it can reduce a person’s taxable income to zero, but if the application of the credit results in a negative tax owing, no refund is issued. The good news for you, if you are a caregiver, is that any amount of the disability tax credit not needed by the person with the disability to reduce their taxes payable to zero can be transferred to a “supporting person”. A supporting person may be able to claim all or part of their dependent’s disability amount if the person with a disability was resident in Canada at any time during the tax year and was dependent on the supporting person for some or all of the basic necessities of life (food, shelter, or clothing).
If you are just finding out about this tax credit now and you think you or your loved one should have qualified for the DTC several years ago, you can in fact claim for the credit for up to 10 years into the past. You do this by filing an adjustment on prior tax assessments. The form you need for this can be found at http://www.cra-arc.gc.ca/E/pbg/tf/t1-adj/t1-adj-12e.pdf
It is important to note that it takes time to have your physician sign off on the tax credit certificate, and then have it reviewed and approved by Revenue Canada. You cannot move forward without your letter of approval from Canada Revenue. So start the ball moving now. Once you have your letter of approval, you can file adjustments on each of the tax years that were made applicable on the certificate, to a maximum of ten years.
The other tax detail that apparently many people do not understand is how many items are covered as medical expenses. For caregivers adapting a home to accommodate a loved one, the adaptations, and the expense of same can by huge! (voice of experience here!) The link for that information is: http://www.cra-arc.gc.ca/E/pub/tg/rc4064/rc4064-12e.pdf
If you are at all confused by the paperwork, either phone Canada Revenue’s help-line at 1-800-267-6999 or drop by a tax specialist and get some help.
p.s. Apparently there are reports of eligible people not wanting to have the certificate completed as it means they are admitting they have difficulties and their pride is getting in the way. Depending on how much tax they pay, this credit can be worth thousands of dollars each year. This money could go quite far in making their life easier and some of their activities more independent. Stick with your assertion that it is an important step.
I’m so glad you are sharing this bit of knowledge. I have the certificate and my financial advisor told me that last year only 6% of those eligible held one. Spread the word!
Hi, Natalie, thank you for checking out the article. and thank you for reminding us that many young people also qualify for this tax credit, which would help out the family income when young children are involved! I’m still hoping one day you will no longer need it!! xoxo