The disability tax certificate (DTC) is a non-refundable tax credit that helps people with disabilities and the people who support them reduce the amount of income tax they may have to pay. This federal initiative is designed to provide some relief from the higher medical and related costs incurred by individuals living with a disability and operates independently from provincial disability support programs. It’s surprising then, how underutilized the DTC is with only 40 per cent of those qualifying individuals in Canada, obtaining one.
Here’s how it works: The DTC reduces income tax payable by allowing access to a non-refundable tax credit. The credit reduces the amount of income tax owing, dollar for dollar, to the available annual maximum. This is different from a tax deduction, which reduces the amount of income that is subsequently taxed at the marginal income tax rate. The credit may be used by the individual, their supporting person or shared between them. A supporting person could be a spouse, parent, child etc. who the disabled person lives with.
Another important thing to note about the DTC is that it may also be used to offset annual attendant care costs for those living in residential facilities such as seniors with dementia or Alzheimer’s. An individual may apply the DTC retroactively for up to 10 years, provided the diagnosis or symptoms were present during that time. If you or a loved one is living with a disability, you should consult an accountant familiar with the DTC annually to determine the most tax-efficient method to account for a particular year’s disability costs.
The DTC application form is available online at www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2201.html . If you need more information on financial planning for loved ones with a disability, please feel free to contact me at 416-777-4944 or firstname.lastname@example.org
Mark Shimkovitz is a financial advisor with Raymond James Ltd. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The view and opinions contained in the article are those of the author, not Raymond James Ltd. Raymond James Ltd. member of Canadian Investor Protection Fund.