Article

Understanding the Disability Tax Credit

The disability amount is $4,233 on the 1997 Income Tax and Benefit Return, translating to a credit of about $1,100 for combined federal-provincial income tax purposes in most provinces. If the taxpayer does not need the full credit, provisions in the Act allow it to be transferred to a spouse or other supporting person who could otherwise claim him as a dependant.

The statutory requirements are as follows:

1. the individual must have a severe and prolonged mental or physical impairment;
2. the effects of the impairment are such that they affect the individual’s ability to perform life’s basic daily living activities;
3. a medical doctor (or optometrist in the case of sight impairment) has certified on a prescribed form (T2201) that the individual meets the two conditions outlined above and the taxpayer must have filed this certificate for the taxation year in which the credit is being claimed; and
4. the taxpayer is precluded from claiming any monies paid for an attendant or care in a nursing home incurred in the year.

1. above has been defined by the courts to mean that the impairment must have lasted or be expected to last for a continuous period of at least twelve months while

2. has come to refer to the fact that the taxpayer is suffering from his disability, even with therapy and the use of appropriate devices and medication, at least 90% of the time.

1. perceiving, thinking and remembering;
2. feeding and dressing oneself;
3. speaking in a manner that can be understood by another individual within a quiet setting;
4. hearing so as to understand another individual within a quiet setting;
5. bowel or bladder functioning; and
6. walking a distance of one hundred metres without having to stop and rest.

The individual must be legally blind, unable to perform any one of the above activities, or require an inordinate amount of time to do so. The fact that he may not be able to perform all of these basic activities at all times, does not, of itself, assure that the taxpayer will qualify for the credit.

The requirement of certification by a medical doctor has been expanded to include such medical practitioners as chiropractors, therapists, dietitians and others so long as they are licensed to practice in your province. Revenue Canada, however, reserves the right to access doctors from Health Canada to assist them with the specific medical issues involved.

In 1995 along, nearly 550,000 taxpayers applied for the credit on their income tax returns. Most of these claims were accepted by Revenue Canada. But there were other seemingly legitimate claims that were rejected due to the complexity and restrictiveness of the statutes. Revenue Canada has historically insisted upon strict application of the criteria. The problem appears to be one of subjective applications of provisions (a) and (b) above which the law does not allow to be applied with any personal sympathy for the afflicted taxpayer involved.

Note: The provided articles highlight tax, accounting and other financial matters in general terms. Nevcon recommends that no action be taken based solely on the basis of information contained in these articles. Specific professional advice should be obtained as individual circumstances must always be taken into account.

Article ©1998 The Quarterly Dividend
Reprinted with permission