Tax support for clients with disabilities

Editor’s note: this is an updated version of a story that first ran in 2014.

People with physical and mental disabilities often face serious financial challenges related to earning limitations or direct out-of-pocket expenses.

Let’s look at what government support is available. Unless noted otherwise, all figures are for 2017.

Read: More support for clients with disabilities

Direct financial assistance

CPP/QPP

This disability benefit is available to people under age 65 who’ve made recent CPP/QPP premium payments while working. The disability must be both:

• severe (a person is incapable of regularly pursuing any substantially gainful occupation); and
• prolonged (long-term and of indefinite duration or is likely to result in death).

The maximum monthly disability benefit a qualifying person can receive is $1,314, plus a maximum monthly benefit of $241 for each dependent child the disabled contributor has. These are related but separate applications, and must be made using Government of Canada forms.

Child disability benefit

Based on family net income, the federal government will pay as much as $227 per child each month to families with children qualifying for the disability credit (see below). To qualify, complete tax form T2201, which must be approved by CRA. The payment is then delivered as part of the monthly Canada Child Benefit payment.

Provincial support programs

Some provinces have stand alone disability support programs, while others recognize disability as a special qualification within the overall social support system. Generally, a licensed physician using provincially prescribed criteria and forms must certify the disability.

Entitlement is reduced or eliminated where earnings or assets exceed regulated thresholds, though some provinces will disregard assets held in a discretionary trust for the disabled person (e.g., a Henson trust).

Provincial approaches vary in terms of service offerings, cost reimbursements, rates for family size and composition, and direct financial assistance. The program in Ontario is the Ontario Disability Support Program (ODSP). The base for a single person (which could be reduced depending on circumstances, including other assets and income) would be income support of $662 plus shelter allowance of $489, for a total of $1,151, or $13,812 annually. The amount increases if there is a spouse or other dependants. Information is available through the Ontario Ministry of Community and Social Services.

Individual income tax relief

Tax measures commonly available to assist persons with disabilities fall into three categories.

• Deductions: Qualifying items reduce the taxable income upon which relevant federal and provincial tax rates are applied.
• Non-refundable tax credits: Once that tax liability is calculated, these credits directly reduce that liability but cannot take it below zero. The qualifying amount is multiplied by the applicable federal or provincial rate (usually the lowest bracket rate) to calculate the credit value. The federal rate is 15% and Ontario’s is 5.05%.
• Refundable tax credits: This results in the amount payable to the taxpayer, even when tax liability has been reduced to zero.

The following is an outline of the key items and their potential dollar values (often income-dependent), though it does not cover all possibilities. For a comprehensive view, including detailed qualification criteria, consult Guide RC4064 “Disability-Related Information.”

Disability credit

This is a non-refundable credit, available both federally and provincially. Using tax form T2201, the disability must be certified by a qualified medical practitioner as being both severe (i.e., blindness, conditions requiring life-sustaining therapy, a marked restriction in speaking or hearing, walking, feeding, dressing, elimination or a marked restriction in everyday mental functions) and prolonged (lasting, or expected to last, continuously for at least 12 months).

The basic federal amount is $8,113. A supplement worth as much as $4,733 may be available for children under age 18, though the value is reduced if certain child and attendant care expenses are claimed for the child.

Taken together and multiplied by the federal credit rate, the maximum possible value for these two credits is $1,927. The Ontario disability amount and supplement are $8,217 and $4,793, for a combined value of $659.

Disability supports deduction

A disabled person may deduct qualifying out-of-pocket expenses incurred to work, go to school or conduct grant-supported research. The person may not deduct amounts already claimed under the medical expense credit (whether claimed personally or on his behalf as a dependant), or amounts already reimbursed by health insurance plans or through other non-taxable payments. Generally, the deduction cannot exceed the person’s earned income for the year, calculated using CRA Form T929.

Medical expense credit

A person may claim eligible medical expenses, whether incurred in Canada or elsewhere, that will be paid in any 12-month period.

Special rules apply to attendant care expenses, and whether the care was received at home or in a facility. This is a non-refundable tax credit, equal to expenses that exceed the lesser of $2,268, (indexed annually) and 3% of the disabled person’s net income. Ontario’s medical expense credit also uses a lesser-of formula, being its own prescribed dollar value, $2,302, and 3% of the disabled person’s net income.

Eligible expenditures can be claimed either under this medical expense credit calculation or as a disability support deduction, but not both. Accordingly, run a test calculation to determine which of the two yields the best net tax result.

Refundable medical expense supplement

This is a refundable credit designed to assist people with low incomes who claim either the disability supports deduction or the medical expense credit. Subject to a clawback where family net income exceeds $26,644, this federal credit can be worth as much as $1,203.

Home buyers’ amount

A credit amount of $5,000 (value $750) is available for first-time purchasers of a qualifying home. You do not have to be a first-time buyer if you are eligible for the DTC or you bought the home for the benefit of a related person who is eligible for the DTC. However, the purchase must be to allow the person with the disability to live in a home that is more accessible or better suited to his or her needs.

Home accessibility tax credit

You may claim up to $10,000 (value $1,500) for eligible home renovations if they allow a person to gain access to or be more mobile or functional within the home, or if the renovations reduce the risk of harm within the home. The eligible person must be 65 or older, or be eligible for the DTC. The credit may be claimed by that person, or by a homeowner who supports the eligible dependent person if certain criteria are met.

Also read: More support for clients with disabilities