Unlocking the Benefits of the Disability Tax Credit

Many Canadians with disabilities are eligible for the Disability Tax Credit (DTC) but don’t apply, missing out on significant tax savings and other benefits. The DTC is more than a tax credit, it is the key to unlocking several additional disability benefits such as the Registered Disability Savings Plan (RDSP), the Canada Dental Benefit, and the new Canada Disability Benefit. Understanding and accessing these resources can make a substantial difference in your financial well-being and quality of life.

What is the Disability Tax Credit?

The Disability Tax Credit is a non-refundable tax credit designed to help reduce the income tax burden for individuals with disabilities or their supporting family members. To qualify, an individual must have a severe and prolonged impairment in physical or mental functions, as certified by a doctor.

Who is Eligible?

Many people assume that the DTC is only for those with visible or severe disabilities, but the eligibility criteria are broader than you might think. Conditions such as diabetes, mental health disorders, and chronic pain can qualify if they substantially impact daily life. Unfortunately, many eligible individuals don’t apply, often due to a lack of awareness or misconceptions about the application process. In June 2022 the eligibility requirements were widened, making it even easier for individuals to qualify.

The Application Process

To apply for the DTC, you and your doctor need to complete Form T2201. The form is then submitted to Canada Revenue Agency for approval. Be aware that most doctors charge a small fee to complete the form.

Form T2201 is available online here: T2201 Disability Tax Credit Certificate – Canada.ca

How Much Can You Save?

In British Columbia, the tax savings from the DTC can be substantial. The federal portion of the credit saves $1,481 and the BC portion saves $477.¹ That’s a total of $1,958 in tax savings per year. Tax savings are even higher for disabled children age 17 and under.

If the person with the impairment does not need the entire disability amount, they may transfer some or all of the disability amount to a supporting family member. If you were eligible for the DTC in previous years but didn’t apply, you can request adjustments to your past returns for up to ten years, potentially resulting in a significant refund.

Beyond Tax Savings: Unlocking Additional Benefits

Registered Disability Savings Plan (RDSP)

One of the most valuable benefits unlocked by the DTC is the ability to open a Registered Disability Savings Plan (RDSP). The RDSP is a retirement savings plan designed to help people with disabilities save for the future. Contributions to a RDSP can attract substantial government grants and bonds.

RDSP Disability Savings Grant rates for adjusted family net incomes less than $106,717²