Budget May Bring Improvements to Disability Tax Credit
May 14, 2021 by David Christianson
The Disability Tax Credit (DTC) is available to individuals - including minors - who have a physical or mental impairment that causes a person to be “markedly restricted in at least one of the basic activities of daily living.”
More definitions and eligibility criteria to follow, but two important items first. One is that the disability tax credit can reduce federal taxes by about $1,300 and Manitoba taxes by about $700 per year and can open the door to several other government programs, including the Registered Disability Savings Plan, the Child Disability Benefit and the disability supplement to the Canada Workers Benefit.
The second item is that the recent federal budget proposed to expand the criteria for “mental functions necessary for everyday life” to add problems with attention, concentration, judgement, problem-solving, goal-setting, regulation of behaviour and emotions, verbal and nonverbal comprehension and adaptive functioning to the current list of memory, goalsetting and judgement (taken together) and adaptive functioning as qualification criteria.
The budget will recognize more activities in determining eligible time spent on “life-sustaining therapies” (things like dialysis or insulin injecting) and reduce the required frequency from the current minimum of three days a week to two days.
Taken together, these changes should result in a fairer application of the DTC qualification criteria and a likely increase in the number of people approved for a disability certificate. In Budget 2021, the government estimated an additional 45,000 people will qualify.
For full details of the changes, go to Annex 6 of the federal budget or search “Budget 2021 and disability tax credit”.
On the other hand, Winnipeg lawyer Krista Clendenning, who practices in disability-related estate planning, has advised me that Manitoba legislation has been introduced called The Disability Support Act that may make it harder for Manitobans with disabilities to qualify for provincial income support.
The new Manitoba legislation considers additional resources when assessing an applicant, including reduced rent accommodations, gifts made by family members, and a broader range of other income. Any recipients, future applicants or persons planning around the EIA disability regulations and rules should pay careful attention to the proposed changes.
Back to the federal budget, the government also promised $11.9 million over three years to undertake consultations aimed at reforming the eligibility process for federal disability programs and benefits. This came after two reports from the CRA Disability Advisory Committee (2019 and 2021) detailing the uneven application and obsolescence of current eligibility rules.
These are proposed changes to apply for 2021 and subsequent years, but will only become law if the budget legislation is passed and proclaimed.
The current criteria will remain that a medical practitioner must certify that an individual has a severe and prolonged (12 months or longer) impairment in physical or mental functions. The effect is that, even with devices, medication and therapy, the individual is either blind or is “markedly restricted in their ability to perform a basic activity of daily living (or would be if not for extensive life-sustaining therapy)” or they are “significantly restricted” in more than one basic activity of daily living.
The activities are defined as walking, speaking, hearing, elimination, feeding, dressing or mental functions necessary for everyday life. A person may also qualify if they need life-sustaining therapy to support a vital function, with the current minimum at least three times a week for an average of 14 hours a week.
The CRA website provides more detail and good examples, both in writing and in video form. That’s a good place to start if some of this may apply to you or a family member, including a senior.
The application process requires completion of a T2201 form, with the second part certified by the appropriate medical practitioner, which may be a doctor, nurse practitioner, speech language pathologist, audiologist, occupational therapist, physiotherapist or psychologist, depending on the nature of the impairment.
Now get out there and enjoy our spring weather - alone again, naturally…
* * *
Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIM is a Senior Wealth Advisor & Portfolio Manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.
