Case Study: How to claim disability tax credit on personal tax return?

📌Personal Income Tax Tip – Disability Tax Credit

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What happens if this is the first time that you are claiming your disability amount on your Personal income tax return? How we can help you?

When clients come to us to request adding a disability amount on their income tax returns, there are a number of steps and procedures that we will need to consider and here is a brief walk through on how we will support you on your next visit.

First of all, our accountant will likely ask you the following question:

Question: “Can you tell me if this is your first time claiming for the disability amount on your tax return?”

(Yes or No)

💡 If your answer is no, then that is great.

This means that there is generally a record in place with the Canada Revenue Agency (CRA) and we only need to confirm that the record is there. We will ask you if you can provide us with your last year tax return for a quick confirmation.

💡 So what if the answer is yes?

Then we will need to obtain additional proof of documents from you. Here is the information that we will need from you for your next visit:

  • You will need to provide us with your Notice of Determination from CRA. This notice will indicate if CRA has determined whether your are eligible for the credit.
  • If your are unable to provide this piece of information, we can look up the information for you on your CRA account.
  • If you can’t provide us the Determination notice from CRA and there is no CRA record, then it is likely that the disability tax credit application has not been done and we will need to assist you on applying for the disability tax credit.
  • If needed, we may also contact CRA to ensure that there are no outstanding issues that needed to be addressed before we moved on to the next step (which is applying for the disability tax credit).

The Procedure for applying for the Disability Tax Credit:

To apply, you will need to complete the Form T2201, which is the Disability Tax Credit Certificate form. This form is required for income tax return purpose only and it will need to be signed by your medical practitioner.

Sometimes, this process can take up to one year. The reason is that this application process will involve the medical practitioner and the CRA may request further information from them for clarification. In this case, there will be a timing difference between your approval time and tax return deadline (i.e. April 30). We will then need to exclude this disability tax credit from the current tax year and make an adjustment after confirmation is received from CRA.

Once the Disability Tax Certificate has been approved by CRA and the client has received the notice of determination from CRA, we can then go back to the personal tax return and add the eligible disability tax credit for the appropriate years.

You may approve for more than one year of disability tax credits. CRA may suggest you to revise your previous years’ personal tax return by adding these disability amount to your returns.

The reason is that often, the clients are qualified for the disability credit for a long period of time; but their application were delayed or ignored for several years due to various different reasons, such as life taken over by sicknesses or they have mountain of doctor appointments for themselves or their loved one. They could even lose their jobs. There may be a number of years that tax credits had not been claimed; and therefore, there is a big adjustment that needs to be follow up after the confirmation process.

📌Once you have your disability tax credit set up, you can apply them immediately on your tax returns until your status changed.

💡 Should you have any questions on setting this credit, please contact us. We are here to help.

📌Other Quick Tips:

What happens if I claimed the disability tax credit before I received the Notice of Determination from CRA?

It may be worth to mention that it is possible to claim the disability tax credit without having valid disability information on CRA’s file at the time of submitting a tax return; however, it may delay CRA’s assessment of your tax return. This is because the CRA still has to make sure an individual qualifies for the credit before the authority allows it. 

What about if my children are qualifying for the disability tax credit? Can the parents claim this credit instead?

For children with special needs (such as autism), they may qualify for disability tax credit and their parents may be eligible for claiming this disability tax credits on their tax returns. The credits can be carrying back from the birth year of your child. If you need assistance, please contact us. We are here to help.

Where can I find more information about the Disability Tax Credit?

Tax requirements can change all the time and new information may be provided after my blog post. For up-to-date information about applying for the Disability tax credit, please go to CRA website (RE: tax credit).

Thank you for stopping by our website and looking forward to seeing you soon at our next appointment.

Cheers, Alice

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