My grandmother passed away last year. I recall the pastor of her church visiting her a couple of years ago, and he spent a few moments praying with her. "And Lord, we thank you for the many years you've given Ruth here on Earth," he said. "And we trust that you will take her home to heaven in your perfect timing." At that point, my grandmother piped up: "Hey, what's the rush?"
Grandma struggled with her health for her last few years with us.
She had disabilities that qualified her for some tax relief. Our tax system is designed to provide help to many who have certain types of disabilities, but the rules can be complicated.
Here's a primer on the subject.
Our tax law uses the phrase "mental or physical impairment" to describe the most severe disabilities. To receive tax breaks, you'll need your doctor or other qualified practitioner to certify your impairment using Form T2201. The rules require you be "markedly restricted in a basic activity for daily living for a prolonged period." This restriction can be mental or physical and is evidenced when it takes you an inordinate amount of time to perform the activity. The restriction is considered "prolonged" if it's expected to last for 12 months or longer. If you're blind, you're considered disabled by default.
You might also be considered disabled if you are significantly restricted in performing more than one activity for daily living and the cumulative effect amounts to being "markedly restricted." Clear as mud? I know, it's a little convoluted. Our tax law can read that way. The key is this: Have your doctor understand, complete and sign Form T2201 to evidence your disability.
You'll need a qualified practitioner to complete Form T2201. The form should be filed with your tax return for the first year in which you're claiming the disability tax credit (DTC).
You don't have to wait until your tax return is filed to file Form T2201.
You can file it in advance if you'd like. This will allow the Canada Revenue Agency (CRA) time to prepare their views on whether you qualify for the DTC and could speed up the processing of your tax return.
Different types of practitioners may be able to complete Form T2201. It usually varies with the type of disability.
If your disability relates to hearing, for example, either a medical practitioner or an audiologist can complete the form.
In certain other cases, only a medical practitioner will do.
As an aside, any fees you pay to the practitioner to complete the form can be claimed as a medical expense.
It can be harder to qualify for the DTC than you might think. Some people have had prolonged and pretty debilitating problems but haven't qualified. This is often the case with learning disabilities. You might be able-bodied in many respects (able to see, hear, speak, walk, dress and feed yourself, etc.) but may still need help most of your life with important tasks and not be considered disabled for purposes of the DTC.
If your doctor or other practitioner fails to read or understand the criteria (which is more common with highly specialized practitioners ), he or she might not certify a prolonged disability that will qualify. I've seen cases where there's been a back-and-forth discussion with the taxman and the end result can be that the CRA refuses to acknowledge that a qualifying disability exists.
Disability tax relief
The DTC is a non-refundable tax credit that can be claimed if you have a qualifying disability, but only after the CRA has confirmed your eligibility by reviewing your Form T2201. Where the disabled person has not reached 18 years of age by Dec. 31, the basic DTC is increased. This increase is limited where amounts have been deducted with respect to the disabled person as child-care expenses, a disability support deduction, or have been claimed as a medical expense.
Just to add to the complexity, the DTC is denied where a medical-expense tax credit is claimed for attendant care or care in a nursing home for the disabled person. Having said this, care payments up to a dollar limit (currently $10,000 each year, or $20,000 in the year of death) can be claimed as medical expenses without affecting the DTC claim. Sound confusing? Try explaining it to your 90-year-old grandmother when you visit her.
I'll share more on this topic next time.
Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.