As we usher in the new year, it’s a time for reflection and taking stock of various aspects of our lives, including our health. For many, this period of introspection may reveal changes in physical or mental health that could impact daily living. If you or a loved one has experienced such changes, it might be worth exploring the Disability Tax Credit (DTC). This non-refundable tax credit can provide significant tax relief for individuals with severe and prolonged impairments in physical or mental functions.

Overview of the Disability Tax Credit

The Disability Tax Credit is designed to help reduce the amount of income tax that individuals with disabilities, or their supporting family members, may have to pay. The idea behind the credit is to recognize that there are additional costs and challenges faced by those with disabilities and provide some relief. The total value of the credit varies slightly from province to province, but in Ontario, the credit on its own is worth about $1,987 in tax savings for the 2024 tax year. 

If you or your loved one are paying for a retirement home, long-term care facility, or other type of attendant care, getting the necessary medical certification could be worth much more than that – tax savings of up to 20% of the attendant care fees paid. This would be instead of, in addition to, or as a partial combination with the disability tax credit depending on the circumstances. Your McCay Duff LLP consultant will choose the option that results in the highest credit for your situation.

Criteria for the Disability Tax Credit (DTC)

To qualify for the DTC, an individual must have a severe and prolonged impairment in one of the categories listed below, or a significant limitation in two or more categories.

Vision: The individual is considered blind if, even with the use of corrective lenses or medication, both eyes meet at least one of the following criteria:

  1. Visual acuity of 20/200 (or worse)
  2. Greatest diameter of the field of vision is 20 degrees or less

Speaking: Difficulty speaking so as to be understood by a familiar person in a quiet setting.

Hearing: Difficulty hearing so as to understand spoken conversation with a familiar person in a quiet setting.

Walking: Difficulty walking without help or taking 3 times longer than someone else of the same age who does not have an impairment.

Eliminating (Bowel or Bladder Functions): Difficulty personally managing bowel or bladder functions.

Feeding: Difficulty preparing food or feeding oneself, including chewing and swallowing.

Dressing: Difficulty dressing oneself, excluding activities like identifying, finding, or shopping for clothing.

Mental Functions Necessary for Everyday Life: Difficulty performing mental functions necessary for everyday life, such as adaptive functioning, attention, concentration, goal setting, judgment, memory, perception of reality, problem-solving, regulation of behavior and emotions, and verbal and non-verbal comprehension.

Life-Sustaining Therapy: Therapy that supports a vital function, is needed at least two times per week, and requires an average of at least 14 hours per week. Examples include dialysis, insulin therapy, oxygen therapy, chest physiotherapy, and others.

How to Apply for the Disability Tax Credit

If you think you might meet the criteria, it could be worth applying for the Disability Tax Credit. Applications do not need to be made every year. Depending on the circumstances and the age of the applicant, the application might only need to be submitted once to be approved indefinitely.  If the application needs to be resubmitted in a future year, CRA will advise to that effect. Also note that if the impairment started before the 2024 tax year, prior year returns can be adjusted.

Applying for the DTC involves filling out form T2201. This can be done electronically or on paper.

Applying Electronically for the Disability Tax Credit

The Canada Revenue Agency (CRA) has introduced a new digital application portal to streamline the process of applying for the Disability Tax Credit. This portal allows both parts of form T2201 to be completed digitally, which should shorten the amount of time it takes for an application to be reviewed.

Step 1: Applicant

The person with the impairment or their family member fills out Part A of the digital application form. This can be accessed by signing in to My Account at: https://www.canada.ca/en/revenue-agency/services/e-services/digital-services-individuals/account-individuals.html

Scroll down to Benefits and Credits section, then choose “Benefits and Credits”.

Select the “Apply for DTC” button to open the digital form and complete the information.

It is also possible to submit a digital application over the phone by contacting Canada Revenue Agency and speaking with one of their agents at 1-800-959-8281.

Important: At the end of step 1, you will receive a reference number. Do not lose this as you need to provide it your medical practitioner.

Step 2: Give reference number to medical practitioner

The medical practitioner will need the reference number to complete Part B of the digital application form. The last name and date of birth that they enter must also match what CRA has on file.

Step 3: Medical Practitioner

The medical practitioner completes Part B of the application, which can be found here: https://apps.cra-arc.gc.ca/ebci/uisp/dtc/entry

The CRA may contact the medical practitioner’s office to verify the source of the application.

Once the medical practitioner completes their portion, the application will be reviewed by the CRA.

Applying for the Disability Tax Credit Using the Paper Form T2201

Step 1: Download the Paper Form

The form can be found at this link: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2201.html

Step 2: Applicant

The person with the impairment or their family member fills in the identification sections of the form and then passes it along to the medical practitioner.

Step 3: Medical Practitioner

The medical practitioner completes the medical information section of the form and returns it to the applicant.

Step 3: Submit the Application

If you have a PDF or scanned version of the completed application form, it can be uploaded to the CRA by signing in to My Account and then selecting “Submit Documents”. Your McCay Duff consultant can also upload it to CRA on your behalf.

Alternatively, the application can be mailed to the CRA at one of the addresses listed on the paper version of the form. We recommend that you keep a copy for your records.

Processing Time for the Disability Tax Credit

According to their website, the CRA’s goal is to review applications within 8 weeks. Ideally applications would be submitted in early January to give CRA time to review them before your personal tax return needs to be filed.  

The new year is an opportune time to assess your health and determine if you or a loved one might be eligible for the Disability Tax Credit. With the introduction of the CRA’s new digital application portal, applying for the DTC has become more accessible and efficient. If you believe you meet the criteria, consider reaching out to your medical practitioner to begin the application process and take advantage of the tax savings available to you.

McCay Duff LLP in Ottawa provides comprehensive tax solutions and support

At McCay Duff LLP, our trusted team of Chartered Professional Accountants provides high-quality tax and business advisory services to Ottawa and surrounding area businesses. We assist corporations to achieve maximum profitability, minimize tax obligations and stay compliant with tax laws through expert tax planning, preparation, and advice. If you need assistance maximizing your pension income tax credit, contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.