Tax Planning and Other Considerations for Individuals with a Disability
Being an individual with a disability, or caring for such an individual can mean additional considerations are needed on how to manage day to day life. Over the years, the government has taken this into account with a number of tax related measures which are important to be aware of, as well as some other programs which would be of interest.
Tax Related Matters
Disability Tax Credit (“DTC”)
The DTC provides tax savings of up to $1,600. In order to be able to claim the credit, a claim form (Form T2201 “Disability Tax Credit Certificate”) is required to be completed by a medical practitioner, filed and approved by CRA. The DTC is available to be claimed by either the individual with the disability, the spouse of the individual with the disability or the taxpayer who supports the individual with the disability.
If claims for the disability tax credit have not been made historically, there is an opportunity for retroactive adjustments on your previous tax returns as the DTC can be claimed as far back as 10 years. Ensure that the medical practitioner denotes in the T2201 form the starting dates of the disability, and when filing, check the box to request prior year adjustments to be done automatically.
Once approved, CRA may request the T2201 forms be submitted again to review whether the disability credit may continue to be claimed, however you are required to advise them if your status changes.
In addition to the DTC some specialized medical equipment may also result in tax savings.
Without getting into an exhaustive list, some of the types of medical expenses which may be applicable include; full time or part time attendant care, devices or software to read print for those who are blind or with a learning disability, lift or transportation equipment, costs regarding a personal therapy plan and therapy itself, reading services, talking textbooks, tutoring services, as well as the costs related to getting the disability medical tax credit form completed. .
Other available personal tax credits
1. Home buyer’s amount ($5,000 credit) is available, for a taxpayer that qualifies for the DTC or for a person purchasing a home for a related individual that qualifies for the DTC, on the purchase of a home that provides more accessibility.
2. Home accessibility tax credit (capped at $10,000 of expenses per year) is available on renovations done on a home in Canada to improve the safety and/or accessibility of the home for a person with a disability.
Home Buyers’ Plan Accessibility
Typically the Home Buyers’ Plan is accessed by Canadians who are looking to purchase their first home. For individuals with disabilities, there is no requirement that it must be a ”first home” as any home may qualify when the person withdrawing the funds has a disability, or doing so to purchase a home for a related individual who has a disability.
Employer Paid Expenses
For employees with disabilities, there are some items which may be paid for by an employer and received as a non-taxable benefit such as reasonable transportation costs for an individual with a disability to travel from their home to work, as well as reasonable benefits for attendants.
Qualified disability trust (“QDT”)
The most significant type of QDT trust is a trust that is set up to benefit an individual with a disability, one for which the individual is not the trustee and cannot require the trust to pay out monies to the beneficiary, and may otherwise be referred to as a Henson Trust. The purpose of a Henson Trust is to provide funds that would be available for use at the trustee’s discretion, for the disabled beneficiary, while not having these assets counts as assets of the beneficiary for purposes of the “household assets” determination for ODSP payments discussed above.
Sales Tax Exemptions
Home care services (such as cleaning, laundering, meal preparation and child care) and personal care services (such as bathing, feeding, and dressing) are GST/HST exempt if they are government subsidized or funded. Individuals receiving such exempt services should note that additional home care services received will be exempt and such service providers should be aware of this.
Motor vehicles purchased in Canada with either a device to assist placing a wheelchair in the vehicle or an auxiliary driving control to assist a disabled individual in operating the vehicle are eligible for a rebate for the GST/HST paid.
Training services related to assisting an individual with coping with the disability are sales tax exempt.
Be aware that there are also various provincial level sales tax exemptions for certain goods or services provided to individuals with disabilities and to review such exceptions for the applicable province to understand their applicability.
Registered Disability Savings Plan (“RDSP”)
An RDSP is intended to assist families with saving for long-term financial stability to help fund items such as future medical or living costs for a disabled individual eligible for the DTC. Such plans can be opened by the individual, a parent if the disabled is a minor, or a party legally authorized to act on behalf of the beneficiary. The main advantage, similar to other registered products, is the deferral of income tax into future years when funds are drawn from the plan.
The lifetime contribution limit for each RDSP is $200,000 which is not tax deductible and can be made up until the year the beneficiary turns 59. Contributions subsequently withdrawn from the plan are not taxable income; however the Canada disability savings grant, the Canada disability savings bond and investment income earned in the plan are taxable when paid out. The grant is capped at $3,500 per year ($70,000 lifetime) and the bond is capped at $1,000 per year ($20,000 lifetime).
Child disability benefit
Parent’s receiving the Canada Child Benefit (“CCB”) for a child under 18 who is also eligible for the DTC may be entitled to an additional $227.50 per month supplement to the CCB. Similar to the DTC, retroactive payment adjustments are available under this program. Application is automatic once the child has been approved for the DTC and CCB.
Ontario Assistive Device Program
Within Ontario, there may be assistance provided (generally 75% of the amount) which is not income tested, where an individual with a disability requires certain assistive devices. Examples include; mobility aids, hearing aids, visual and communication aids, respiratory equipment, artificial eyes and prosthetics. Details on the program can be found here - https://www.ontario.ca/page/assistive-devices-program/
Note that many public transit bodies provide some level of discount for individuals with disabilities (for example GO Transit offers free travel for an individual assisting someone documented with GO transit as being an individual with a disability). As these policies vary widely and can change, please review with the public transit systems you use.
Access 2 Entertainment Program
The Access 2 Entertainment program is administered by Easter Seals and is rapidly growing in acceptance across Canada, including the recent decision to begin use for the 2018 Canada National Exhibition. Individuals with a permanent disability may complete the application form (available at the Access 2 Entertainment website - http://access2card.ca), part of which may need to be completed by your medical practitioner, then file the form with the applicable fee.
The purpose of the program is to provide more opportunity for individuals to experience various entertainment site and venues which is accomplished, generally, by providing a free admission for an attendant (the individual with the disability pays full fare, the attendant pays none). For an updated listing of places the card may be used, visit their website.
Ontario Disability Support Payments (“ODSP”)
The ODSP is a financial assistance program aimed to help disabled individuals and their families with essential living expenses and/or employment support. Participants must be at least 18 years old, residents of Ontario, be in financial need and meet the program’s definition of “disabled” (which differs from the definition under the DTC explained earlier). You are considered to be in “financial need” if the cost of your household’s basic living expenses are more than your household’s income and assets. Exempt from “household assets” are items such as principal residence, primary vehicle or capital ownership in a Henson Trusts (discussed below).