Home Accessibility Tax Credit

Did you have home renovations during 2016 to:

  • Allow a qualified individual to gain access to, or to be mobile or functional within your dwelling, or
  • Reduce the risk of harm to the individual within the dwelling or in gaining access to the dwelling?

If so, you may be eligible to claim a tax credit (15%) on up to $10,000 worth of renovations. For more detailed information consult CRA – Line 398 Home Accessibility Expenses

Who is a qualified individual?

An individual who is eligible for the Disability Tax Credit (DTC) for 2016.

Who can claim this tax credit?

  • A qualified individual, or
  • An eligible individual (for our purposes, someone who is entitled to claim the disability amount for the qualifying individual)

What is an eligible dwelling?

A housing unit that is owned by the qualifying individual or by the eligible individual.

Eligible Expenses

  • Expenses are outlays made or incurred during the year that are directly attributed to a qualifying renovation and must be for work performed and/or goods acquired in the tax year.
  • For work performed by yourself, you may claim materials, plans, rentals and permits. You may not however claim your own labour or tools as expenses.
  • For work performed by a family member, the expenses are not eligible unless the person is registered for GST/HST.

What are some examples of work are applicable to a child with autism?

  • A fence to contain a child with elopement issues
  • Modifications to the structure to contain a violent or aggressive individual
  • Floors that may lessen the risk of injury

What can’t be claimed?

  • Maintenance
  • Appliances
  • Financing
  • Home entertainment systems
  • Renovations meant to increase the value of the home

Can you double dip?

YES! For those who qualify for renovation costs as a medical expense, both the Home Accessibility Tax Credit and the Medical Expense Tax Credit may be claimed for the same expense. Keep in mind however that the Medical Expense is only for those with mobility issues.

Can you triple dip?

Sure, why not? If you acquired the home for the benefit of a related person who is eligible for the DTC you may be able to claim $5,000 via the Home Buyers Amount even if it is not your first home. The stipulation is the home must be purchased to allow the person with the disability to live in a home that is more accessible or better suited to the needs of that person. Refer to CRA – Home Buyers Amount for more information.

Bill C-462 – Dead on Arrival

Tweet For those of you unaware Bill C-462 the Disability Tax Credit Promoters Restrictions Act ,was passed into law and received Royal Assent (2014-05-29) . Limits are needed for DTC Consultation Firms (link to CBC article on the act) This Disability Tax Credit Promoters Restrictions Act summary This enactment restricts the amount of fees that can…

via Bill C-462 : Protecting Disabled Canadians or a Paper Tiger ? — Canadian Personal Finance Blog

The Most Outrageous Consultants

Would you believe that some vulnerable clients are being charged up to $500 per month to be on Behaviour Consultant’s (BC) waitlists?  With no services delivered at all!

I thought I had heard it all, but now hearing of this has made my blood boil. How professionals could possibly take advantage of such vulnerable families (usually immigrant families with poor English skills) is beyond reprehensible.

Is it legal?

Sadly, yes. If a contract is signed and waiting fees are specified, then it is legal.

Is it ethical?

Unbelievably according to the Behavior Analyst Certification Board (BACB) there is nothing about such fees that would trigger sanctioning of one of their members.

Is it right?

In my humble opinion this is disgraceful and unbecoming of a professional. Any Behaviour Consultant taking advantage of families like this should hang their heads in shame.

What Can You Do?

As a parent (especially one new to the world of autism) you need to get involved with other parents and learn what is  appropriate and what isn’t. I would recommend that you join the Autism Support Network Parent Facebook group.  It is a closed group that is only viewable by it’s members.  Parents can ask questions and quickly have them answered without worrying about what others may see online.

Knowledge is power. Please get involved.

Fitness and Arts Tax Credit

Sadly 2016 is the last tax year that we will be able to claim the Fitness and Arts Tax Credit. They were popular tax credits among parents with disabled children as there was a supplemental credit of $500 for children eligible for the Disability Tax Credit.

Fitness Tax Credit

The maximum eligible amount that may be claimed for 2016 has been reduced to $500 (down from $1,000). The supplemental $500 figure remains intact.

For those who have not claimed this credit before, the amount is increased by $500 as long as at least $100 claimed.  In other words, if you have $200 worth of eligible receipts, the claimed amount would be $700. Most tax software will automatically add the $500 supplement as long as you have indicated that a T2201 has been filed.

Arts Tax Credit

The maximum eligible amount for 2016 has been reduced to $250 (down from $500). The $500 supplement remains intact and works the same as for the Fitness Tax Credit.

The Future

Both of these tax credits will be eliminated for 2017 and sadly the $500 supplement will disappear at the same time.  The Federal Government has not announced any changes that will make up for this loss.

It is true that for most kids there will be an increased amount through the new Canada Child Benefit. This is fine for a typical kid, but there is nothing now to recognize the high barriers that we have getting our children into sports and arts classes.

Autism Funding In BC Has A New Look

ASD Funding has undergone it’s third major renovation. The look is fresh but the primary difference is the usability on tablets and phones. I’ve also gone through each page and updated the information and links that have changed over the past year. I sincerely hope my friends at the Autism Support Network don’t change their name again!


I hope you  enjoy the  new look. Please let me know if see anything out of place.

The New Disability Tax Credit Certificate

Last year Canada Revenue Agency (CRA) held consultations across the country regarding the Disability Tax Credit (DTC) program. The welcome changes involve a simplified Disability Tax Credit Certificate Form T2201 and the method of claiming adjustments to the Disability Amount for previous years.

Some highlights include:

  • The form is reduced from 12 pages to 6
  • Detailed instructions are now moved to the Form RC4064 – Disability Related Information
  • Added a new section to allow for adjustment for previous tax years
  • Added more space for “Effects of Impairments”
  • Added a gentle hint for each mandatory section by labeling it “Mandatory
  • Shortened some sections for clarity
  • For each type of impairment, CRA has added who may certify that section

All these changes are most welcome and will simplify the process for new applicants. The basic premise of DTC application has not changed and advice from other parents who have completed the process remains largely intact.

My detailed T2201 Guide has now been amended. I strongly recommend that you download and read this guide prior to making your initial application.

Tax Changes for 2015

There are a few minor tax changes for the 2015 tax year that parents with ASD kids need to be aware of. Some of the changes are cosmetic and others may have a more substantial impact on your family finances.

Some of the changes include:

  • The Family Caregiver Amount for children under the age of 18, is now claimed on line 367 of your tax return. This tax credit is $2,093 for 2015.
  • The Fitness Tax Credit used to be a non-refundable tax credit, but starting with the 2015 tax year becomes a refundable tax credit. In essence, this means your tax payable for the year can be reduced below zero. Unlike previous years, you may now claim up to $1,000 and if your child is eligible for the Disability Tax Credit (DTC) and provided you spend at least $100, you may add an additional $500 to the total. If you are using tax software (highly recommended), it will automatically add the $500 as long as it knows your child qualifies for the DTC.
  • The Child Tax Credit (this is the base tax credit for all children) has been replaced with an enhanced Universal Child Care Benefit (UCCB) which gives a new benefit of $720 per year for children ages 6 to 17. It’s important to note that this is taxable, so be ready for a tax bill (or a decreased tax refund).
  • For those of you with disabled teenagers, a gentle reminder that you should file tax returns on their behalf starting for the year that they turn 17 (and every year thereafter). This is vitally important for their Registered Disability Savings Plan (RDSP) grants and bonds when they turn 19. The Canada Revenue Agency (CRA) considers the amount of income 2 years prior to the current tax year to calculate government contributions.
  • The Disability Tax Credit for 2015 is $7,899 and the disability supplement for persons under the age of 18 is $4,607. As in previous years, the supplement may be reduced if someone claimed Child Care or Attendant Care expenses. I strongly suggest that you use tax software for this calculation.
  • There are some changes to the T2201 Disability Tax Credit Certificate and how to claim for previous years. I will be expanding on this subject next week.

Federal Budget 2016

I just finished reading through the 2016 Federal Budget and quite frankly they could have done better. I expected a little something for our disabled kids and unfortunately there is nothing positive.

What did we get? Nothing! In fact the government is actually reducing some of the benefits for our kids.

The Fitness Tax Credit and Arts Tax Credit will be cut in half for 2016 and eliminated for future years. Where this really hurts our kids is that we have been able to add $500 to the total as long as we spent $100. This was in recognition of the fact that our kids have high barriers to sports and arts program and frequently need supervision or training to participate. Now our kids are just like the others (as if!).

I’m disappointed with our new Prime Minister. Yes, the previous government definitely had its problems, but at least it was friendly towards persons with disabilities. Some of the enhancements on their watch included:

  • The Registered Disability Saving Plan (RDSP)
  • The Family Caregiver Amount
  • The Fitness Tax Credit with enhancements for disabilities
  • The Arts Tax Credit with enhancements for disabilities

I expected better from this government. Do they not care about the most vulnerable people in our society?

Are you annoyed? Let your local Federal Member of Parliament know about it.

Beyond that, Medicare for Autism Now (MFAN) has an initiative calling for ABA treatment to be universally accessible and covered under Medicare. This is a time sensitive issue and if you want your voice heard, go to their website and see how you can participate.

 

My RDSP Report Card

In 2012 I switched my child’s Registered Disability Savings Plan (RDSP) from BMO to TD Waterhouse. I was fed up with the limited investment options at BMO and their outrageous pricing.

I decided that my investment choices would follow the recommendations of the Canadian Couch Potato using TD e-Series funds. For this account I chose the balanced approach.

How have things worked out so far?  Well, I’m pleased to say that the account has done very well with a rate of return for 2015 of 6.1% and an overall average annual return of 9%.

I love the simplicity of the plan.

  • I make a contribution once a year
  • The government will advise you by letter of the contribution that will attract the maximum grant and bond.
  • Wait for the government to add their contribution.
  • Re-balance the account to the original asset allocation.
  • That’s it.  You are done for the year.

To make the switch refer to my post RDSP – Change of Financial Institution

Disclaimer:  I am not affiliated with any financial institution. I believe you should get the best deal possible, but the prime objective should be to open an RDSP and start collecting free money from the government. If you are more comfortable at a different bank, then by all means go there.

Notice of Determination on Disability Tax Credit

About three weeks ago we mailed in (via certified mail, so we got a tracking ID for the envelope we sent to the CRA) our re-application for the disability tax credit (DTC) for my son. We were not really sure how long it was going to take, however, yesterday we received the response about our…

Source: Notice of Determination on Disability Tax Credit

Time to Re-apply for the Disability Tax Credit Certificate

Let me preface this post with a thank you to Milburn Drysdale at ASDFunding.com (or Autism Funding in BC for Dummies) his documentation is what we based most of this work on, and if anyone asks you, they should check out his site before you read anything over here about Registered Disability Savings Plans for Disability Tax Credits. I’d…

Source: Time to Re-apply for the Disability Tax Credit Certificate

Welcome News From The BC Government

Yes, it’s true! The BC government has actually done something positive for a change.

At present, adults who are receiving the Persons with Disability (PWD) pension, are faced with the burden of asset limits.  You may remember from previous posts that the government would claw back PWD payments until a person’s total assets fell below $5,000 (with some exclusions).

The net result of PWD claw backs meant that any gifts or inheritances to the disabled individual could result in a net zero financial gain.  How frustrating it must have been to gift money to a disabled person only to have the government take back that gift for their own purposes.

Some families were able to dodge the issue by setting up trusts for their children.  The downside to trusts is that they can be difficult to set up and administer, putting them out of reach for the average family.

The BC government has now increased the asset limitation to $100,000 ($200,000 for a couple). This means you can gift money to a disabled adult or have them inherit money without the threat of a PWD claw back.

The new asset limit combined with a Registered Disposability Saving Plan (RDSP) which is exempt from the $100,000 limit, means that the vast majority of families will no longer need to worry about setting up a trust.

My hat is off to the BC government for doing the right thing.  Now if they could just work on raising the PWD payments from the level that is well below the poverty line…….

Child Care vs Medical Expense – Part 4

Last week we saw how claiming either child care or medical expenses may be more advantageous for different families. Now I will give you some simpler guidelines to use for your situation:

  • The first and foremost tip is to use tax software such as TurboTax or Ufile.  Use the software purchased for the previous tax year to examine scenarios for your family.  This will allow you to decide if you want to claim child care or medical expenses for this year.
  • Change the variables in the software to look at the tax savings available to you. One change can so dramatically change the outcome that you can’t reliably use a simple calculator for the problem.
  • When you file your tax using tax software, complete all your entries and just prior to filing, switch the medical expenses from one partner to another to see which is the most advantageous.
  • Remember to examine the total tax owing as a family instead of focusing on one return.
  • If the difference between the two is minimal, you may wish to simplify your filing by claiming only one category.
  • If your total tax owing for the year will be below zero, you may wish to consider the refundable medical tax credit.  Your tax software will calculate this automatically.
  • If you are in a higher income tax bracket, it is a no brainer to claim child care expenses.  Not only is your marginal tax rate higher, but you may also increase the “Family Tax Cut” savings.
  • Have a good look at your non-refundable tax credits on your tax schedule. If they are higher than your tax owing, they are going to waste as you can’t reduce your tax to less than zero using non-refundable credits.

If this is all too hard, don’t beat yourself up.  If you claim either expense, you are saving tax. This is something a lot of people aren’t doing and you should give yourself some credit. Well done and keep up the good work.

Child Care vs Medical Expense – Part 3

Continuing from our discussion last week regarding the merits of claiming child care expenses vs claiming medical expenses, we look at some actual results. It may be too technical for some of you, but please persevere as I will provide some simple solutions. I will use the example of the following fictitious family:

  • A higher income spouse
  • A lower income spouse
  • One child who qualifies for the Disability Tax Credit (DTC)
  • $2,000 in medical expenses other than ABA Therapy or child care
  • $10,000 in expenses which can be claimed as either child care or medical expenses

The following rules were applied to each scenario:

  • Only 2/3 of the lower income could be applied towards child care to a maximum of $10,000 (2014)
  • The higher income claimed the DTC
  • After reaching the end of each scenario, I used TurboTax to decide who should claim the medical expenses

It is virtually impossible to create a formula or spreadsheet to decide which one to claim because of the huge number of variables. Instead I will list some examples in the table below using TurboTax 2014. The lowest tax owing figure is highlighted in green.

Higher Income Lower Income Combined Income Tax Owing using child care Tax owing using   medical expenses Difference
$20,000 $20,000 $40,000 -$200 -$427 $227
$30,000 $10,000* $40,000 -$717 -$427 $290
$40,000 $10,000* $50,000 $342 $448 $106
$40,000 $20,000 $60,000 $2,493 $1,818 $675
$40,000 $40,000 $80,000 $6,091 $6,245 $154
$60,000 $40,000 $100,000 $10,957 $11,633 $676
$80,000 $30,000 $110,000 $13,766 $14,846 $1,080
$80,000 $40,000 $120,000 $16,852 $17,707 $855

*Only 2/3 of the lower income could be applied to child care so the remainder was added to medical expenses

Why is it in the first 4 examples, it could be either child care or medical expenses being more advantageous?

  • A child care claim may indeed reduce an individual’s net income, but it may lower it to the point that non-refundable tax credits are going to waste as they can’t reduce tax below zero
  • A child care claim may lower net family income to the point that the refundable medical expense (one of the few ways to reduce your tax below zero) becomes the greater advantage
  • The medical expense claim may be advantageous if tax owing is kept above zero for both persons. The combined federal and provincial credits may reach approximately 20%

In the $80,000/$30,000 example, claiming the $10,000 as child care saves you $3,086. That is a 30.9% tax savings which is well above the marginal tax rate. Why is that?

  • I admit that this was a head scratcher for me. It took some digging, but the reason is, lowering the net income of one partner increased the “Family Tax Cut” which is the fake income splitting introduced in 2014.

This is all very technical, but next week I will suggest some easy to follow “Rules of Thumb” that you can use to maximize your tax savings.

Child Care vs Medical Expense – Part 2

When it comes time to claim expenses on your tax form, should you claim child care or medical expenses?

A bit of background first.  If you have BI’s caring for your child and you control the invoices, you have the option of putting either “Child Care” or “Tutoring” as the service rendered. Conventional wisdom says that you should claim child care expenses to the maximum allowable ($11,000 for 2015) and the remainder as “Tutoring” which is a medical expense.  The logic is that child care is a tax deduction (much like an RRSP) while medical expenses are only a tax credit.

It sounds logical, but is it true?

The answer is more complex than most people realize. Let’s have a look at the pros and cons of each claim.

Firstly child care:

  • It’s a tax deduction which reduces your taxable income
  • You may claim $11,000 (for 2015) or 2/3 of the income of the lower income spouse, whichever is less
  • The Disability Tax Credit (DTC) supplement will be reduced if you claim Child Care in excess of $2,654 (2014 figure) or $2,507 without reducing the provincial supplement.

Next medical expenses:

  • Firstly the non-refundable tax credit (i.e. it can’t reduce your tax below zero)
    • Only expenses in excess of $2,208 (2015) or 3% of your net income whichever is less, can be claimed
  • Refundable Medical Expenses (i.e. it can reduce your tax below zero)
    • For 2015 the maximum supplement is the lesser of $1,172 or 25% of medical expenses.
    • This is reduced by 5% of combined net in excess of $25.939. It is eliminated when combined net income reaches $49,379
  • Many people focus on the 15% federal tax credit rate and don’t realize that there is also a provincial credit which may add another 5% to the total.

Next week, the answer that completely shocked me

 

Child Care vs Medical Expense – Part 1

I received an email recently from a reader asking about child care expenses. I’ve copied it below:

Hi Milburn,

Long-time fan and avid user of your website. You might recall that we have emailed a few times over the years too.

I have a question about claiming childcare costs properly on my annual taxes. Since our team of BIs primarily work 1-1 with my son, I have only been claiming those hours as childcare. For example, I don’t think a team meeting of 4 individuals would qualify as childcare.

The other monthly BI costs are related to attending team meetings, materials prep and occasional phone call with me.

I have been issuing a separate monthly receipt labelling these costs as “other intervention services” and not claiming them on my taxes. However I’ve started to think that these activities may qualify as “tutoring services” under the medical expense tax credit. Although these activities are not directly involving my son, they are valuable to his long-term care and development.

What are your thoughts on my approach for claiming these monthly activities under these categories?

I’m sure this differentiation and clarity would be helpful to your readers.

Much appreciated,

And my response:

Hi xxxx

Good to hear from you again.

Firstly, you are on the right track by claiming child care expenses before medical expenses.  You may qualify for child care claims if:

  • You and your partner are working
  • You are going to school
  • You are single or
  • You are carrying on research or similar work.

Child care is a tax deduction (much like an RRSP) and will often provide a greater tax reduction than medical expenses which is a tax credit. This is especially true if you are in a higher income tax bracket.

When I create an invoice and receipt for my BI’s, I ensure that the service listed matches what I want to claim on my taxes.  If I qualify for child care claims, that is what the receipt and invoice will show.

Team meetings and overlaps are all part of the process and I don’t believe that a knowing person would suggest that this is improper.  To keep the bureaucrats happy, we will keep things clear and not give them details that they don’t understand.  The service provided should indicate “Child Care” and nothing else.

Once you have reached the $11,000 limit for child care (assuming your child qualifies for the Disability Tax Credit) you no longer need child care receipts.  I suggest that the service now indicate “Tutoring” which is claimable as a medical expense.  The only point here is that you need a doctor’s letter indicating the need for such services.  Once again, do not put extra detail on the invoices and receipts as this will only confuse CRA.

Hope this helps

Regards

Was my advice correct? Is it better to claim child care or medical expenses? The answer turns out to be more complex than one might imagine.

Next week, I will dive into the topic and you might find the answers surprising.

The Power Of The RDSP – Part 2

Susan is a lovely 2 year old who was diagnosed with Autism and is likely to need full time care for the rest her life. Susan’s parents both work and have a combined net income of $80,000 per year. They have provided well for her, but they don’t have any spare funds available to save for her financial future.

Susan’s grandparents want to step up and contribute to her future. They decide to put into their wills that Susan will receive the majority of their estate. They were quite disappointed to learn that putting money directly into the hands of Susan will trigger a clawback from the government, stopping all her disability payments until her assets are reduced to $5,000. Effectively Susan’s grandparents would be giving their estate to the government.

Susan’s parents suggest a better way. They will open an RDSP and the grandparents will contribute $1,500 per year for 20 years for a total contribution of $30,000.

Question: How much will Susan’s account be worth when she turns 50?

Choose:

  1. $255,453
  2. $644,478 or
  3. $844,927?

Let’s do the math using the online RDSP Calculator

  • Susan’s will make three years worth of contributions in the first year. The government has already stipulated that Susan’s disability started at birth.
  • Each year from Susan’s birth, a RDSP contribution of $1,500 will attract a $3,500 grant from the government. That’s over $15,000 in her account in the first year of the plan.
  • When Susan becomes an adult, the government grants and bonds are calculated using her personal income and not that of her parents. She now becomes eligible for the $1,000 annual bond with no matching contribution.
  • Susan’s parents open an account with TD Waterhouse giving them much greater investment options than other institutions. They decide to invest using the Canadian Couch Potato’s portfolio and plan on a conservative rate of return of 5%.

So what will be the account balance when Susan turns 50?

Answer: $844,927

My question to you is: Why would a disabled child’s grandparents hand over their life savings to the government when they could have this kind of impact on their granddaughter’s future?

The Power Of The RDSP – Part 1

Joey is a 6 year old boy with autism. His parents applied for the Disability Tax Credit using the T2201 guide (pdf) available on this website. They were very careful with their application and the Canada Revenue Agency (CRA) agreed that Joey had been disabled from birth.

Joey’s parents are in a low income bracket with a taxable income of only $23,000. They worked hard to ensure Joey received the maximum benefit from the B.C. Autism Funding and took advantage of some tax breaks due to Joey’s disability. Having taken care of their son as best they were able, they now became concerned for his financial future after they died. Unfortunately they had no available funds for a Registered Disability Savings Plan (RDSP), but they opened an account anyway.

Question: How much would Joey’s RDSP be worth when he is age 50 if no one made a single contribution to his account?

Choose from:

  1. $45,587
  2. $83,386 or
  3. $147,296

Let’s go through the math using the online RDSP Calculator.

  • The family income is below $25,356 so the government will contribute a $1,000 bond every year with no matching contribution
  • Backdated bonds will be automatically deposited back to 2008 when the RDSP was introduced or when Joey ‘s disability started (according to the CRA)
  • Joey’s parents invest the funds in simple low cost mutual funds using guidance from the Canadian Couch Potato
  • They conservatively estimate that the rate of return will average 5%

So what will be the account balance when Joey turns 50?

Answer: $147,296

Not only is that a lot of money, but the proceeds are exempt from clawing back any disability benefits (at least in B.C.) that Joey will be receiving as an adult.

My question to you is: If you haven’t opened an RDSP, what is stopping you?

Service Provider Portal

The Service Provider Portal is a new online invoicing system (for the Autism Funding Unit) designed to streamline the payments to service providers.  As a parent there are some things that you need to know.

The Good

Service providers have the right to be paid on time and this goes a long way to making that happen.  Instead of submitting a paper invoice, they complete the online form and are paid almost immediately. It also allows the service provider to see when a Request to Pay (RTP) or a Request to Amend (RTA) has been processed, and the system keeps a running total of how much funding is left.

The Bad

A paper invoice for the family is not required. The service portal will not accept an excel invoice which most Behaviour Consultants (BC) have used for their invoicing in the past.  It may be tempting for a minority of service providers to not provide a separate invoice for their clients, leaving them out of the loop.

The Ugly

In my experience most service providers are completely honest and ethical however as with any group of people there are always a few disreputable characters.  This new system allows fraud to occur at a much faster pace with the families unaware of what is happening until it is too late.  Sadly, MCFD has not been monitoring the RASP list and sanctioning individuals as needed.

What Can You Do?

As a parent, you must insist on monthly updates for Autism Funding Unit (AFU) billing.  This may be in the form of an invoice or a detailed list of hours and hourly rates. It is imperative that you monitor this and contact the AFU the minute you realize that fraudulent billing is taking place. You also need to be aware that the service provider may  cancel or amend their invoice after the fact.

The moment you suspect fraudulent billing is taking place, you must contact the AFU and amend the RTP form to stop further charges. The feedback that I have been getting is that once the money is gone, you are not getting it back.

Could It Happen In B.C.?

There is an outrageous story out of Quebec and Prince Edward Island about the clawback of funds saved by family members for their disabled children. The mean spirited governments in question should hang their heads in shame over what they are doing.

You should read the CBC Story before finishing this post.

The issues in question are about the governments denying disability benefits to individuals even though the savings are invested in a Hensen Trust or a Registered Disability Savings Plan (RDSP). Most provinces (including B.C.) set strict limits on the amount of savings that a person can possess before the government will cease disability payments. The payments resume only after the savings amount falls below the threshold.  In B.C. the limit is $5,000 with some exceptions. The important difference is that in B.C., Hensen Trusts and RDSP payments are generally (with some reasonable exceptions) exempt from triggering clawbacks.

It pains me greatly to say this government did something right, but on this issue they are ahead of many other provinces.  In fact B.C. was the first provincial government to announce after the RDSP launch that they would exempt payments from the plan from causing a clawback.

The answer to the title of this post is unfortunately; Yes this could happen in B.C. The disability benefits are subject to government policy and could change at any time. We must remain vigilant.

New Medical Expense Tax Category

A new medical expense category for the 2014 tax year is the “Personalized Therapy Plan”. In a nutshell this is what you can use to claim expenses paid to your Behaviour Consultant (BC).

In years past, I recommended that you tailor invoices for your Behaviour Interventionists (BIs) and call the service rendered as “tutoring”. This advice still holds true, but for your BCs (who always write their own invoices) you can now file your medical expenses using this new category.

There are a few conditions to claim expenses as a “Personalized Therapy Plan”:

  • The plan has to be designed for someone who is eligible for the disability tax credit
  • The payment is made to someone who is in the business of providing such services to unrelated persons
  • The therapy has to be prescribed and supervised (in the case of a mental impairment) by a medical doctor or a psychologist
  • The plan has to be needed to access public funding for a specialized therapy (as in BC Autism Funding )

Tax Software Checkup

Did your tax software give you the credits and deductions that you planned? It’s not always that obvious, especially for people new to the world of disabilities.

To begin with, I have attached a table of who should claim the different credits and deductions. As you enter your data into your preferred tax software, check off each item that is applicable to you as you enter it.

Remember no matter what software you are using, you need to tell the program a few basic things about your family:

  • The disability status (i.e. T2201) of your child
  • Who will claim the disability amount transferred from a dependant
  • It’s best to complete both spousal returns at the same time to ensure all credits are accounted for and medical receipts assigned to the correct spouse (good software will assist in this task)
  • Who will claim child care, if at all (generally it will be the lower income spouse)

Once your taxes are complete, refer to the next checklist (Post Tax Checklist) to give your tax preparation a mini “audit”.

Attachments:

Which Spouse should claim or receive funds

Post Tax Checklist

Tax Software Face Off

Why should you use tax software? As the parent of a disabled child there are a lot of extra credits and deductions available to you. Not all of them are straightforward. Many of the credits interplay with other credits. For example, attendant care expenses and child care may reduce the disability tax credit supplement. The fitness tax credit and the children’s arts tax credit add $500 to the total as long as you spend at least $100 in either category. In addition there is the family tax cut (not a disability related item) which I understand has as many as 85 individual steps to follow. The days of doing your taxes on paper are quickly coming to an end.

I normally use the most popular tax program in Canada which is TurboTax. It has worked well for me and it’s easy to understand. This year however, for the first time some of the leading tax products are offering their software for free.

Foremost among them is H&R tax. Their online product is now free with no restrictions. I tried it out for comparison sake and whilst I found it worked, I had to make three passes through the data entry before it accepted everything I entered. It’s not quite up to the level of TurboTax in terms of user-friendliness, however you cannot get cheaper than free. Other free programs are available (click here for the full list).

I gave another free product, SimpleTax a run through and found it interesting. It’s a pay by donation product ($0 if you wish). I don’t recommend this product especially for people filing disability claims for the first time. Many of the entries required a manual input of tax credits which may be slightly beyond the capabilities of first time filers.

For me, TurboTax is still the product to beat. It has a step by step procedure and offers extensive help for every entry point. You can buy it just about anywhere (I picked up my copy at Costco for about $28). The online version is $18, but you will pay extra for a spousal return. The CD version will process up to 8 returns.

The free software presents an ideal opportunity for some parents to test their tax capabilities. If you are nervous about your taxes and insist that an accountant do them for you, this is your chance to find out what you can do. Once the accountant completes your taxes, use some of the free software to do it yourself and compare the result. Maybe this will give you the confidence to take over next year.

The big question is how do you know if your chosen product has correctly processed all the disability related items?

Next week I will post a simple tax preparation checklist for you to follow to ensure you are getting your entitlements.

Family Caregiver Amount Update

The Family Caregiver Amount (FCA) is a tax credit for families caring for a child with mental or physical impairments. The credit for the 2014 tax year is $2,058 which equates to a tax savings of $308.

In previous tax years it was a requirement to obtain a doctor’s letter to confirm that the child is dependent on others for an indefinite duration. This is no longer a requirement if the child has an approved T2201 Disability Tax Credit Certificate from the Canada Revenue Agency for the specified time.

This is a most welcome and obvious solution.

For more detail refer to my page Other Tax Credits

Private School As A Medical Expense

Did you know that you may be able to claim the expenses for private school as a medical expense? If the school is required due to a physical or mental impairment, you may apply to the Canada Revenue Agency (CRA) to have the fees considered a medical expense.

Big Cajun Man of the Canadian Personal Finance Blog has a detailed article on how you may be able to claim these expenses.

I have copied his template letter to the CRA and added it to my files page.

Autism Support Network

A special “tip of the hat” goes out to the hard working volunteers of the Autism Support Network. The parent led organization previously known as The ABA Support Network has been re-branded to better reflect their role in British Columbia.

For years now, they have been tirelessly assisting parents new to the world of autism. The countless hours that they have spent on the phone have been completely unpaid and invaluable to families affected by autism.

They continue to expand their reach in B.C. with new parent support groups opening every month as well as focused topic meetings hosted in various communities. Other initiatives include expanding the role of ABA Therapy in schools, recruiting therapists and advocating for families in need.

They have merged with the Autism Education Society and have now achieved charitable status. Please give their website a visit and join their organization (it’s free!)

Well done and congratulations on your re-launch.

Cineplex Movies

Cineplex Odeon in partnership with Autism Speaks have created a sensory friendly experience for the ASD community.

The screenings feature increased lighting levels, decreased volume and a designated calm area.

The price of admission for each person is the child admission price ($8.99).  Cineplex has also confirmed that you may use this special pricing in conjunction with the Access 2 Card. This card gives free (or discounted rate) entry to a support person.

Venues for the Access 2 card include 95% of the theaters in Canada and many recreational attractions in BC. The cost is $20 and is valid for 5 years.

The first showing of the Sensory Friendly movie is this Saturday (Feb 14) in Langley at 10:30 showing The SpongeBob Movie: Sponge Out of Water.

See you at the movies!

My RDSP Report Card

In 2012 I switched my child’s RDSP from BMO to TD Waterhouse. I was fed up with the limited investment options at BMO and their outrageous pricing.

I decided that my investment choices would follow the recommendations of the Canadian Couch Potato using TD e-Series funds.

How have things worked out so far?  Well, I’m pleased to say that the account has done very well with a rate of return for 2014 of 10.34%.  I don’t think this will repeated every year, but it’s a very good start.

I love the simplicity of the plan.

  • I make a contribution once a year
  • The government will advise you by letter of the contribution that will attract the maximum grant and bond.
  • Wait for the government to add their contribution.
  • Re-balance the account to the original asset allocation.
  • That’s it.  You are done for the year.

To make the switch refer to my post RDSP – Change of Financial Institution

Disclaimer:  I am not affiliated with any financial institution. I believe you should get the best deal possible, but the prime objective should be to open an RDSP and if you are more comfortable at a different bank, then by all means go there.

Why Your Autistic Teenager Should File A Tax Return

We discussed in previous posts why the Registered Disability Savings Plan (RDSP) is the best way to save for your child’s future. The key element to the plan is the government grants and bonds (free money!) which is added to the account. The amount added is dependant on the family income.

If the beneficiary of the RDSP is over the age of 18 then the “family net income” used to calculate the government grants/bonds is that of the beneficiary and his/her spouse. The income that will determine the grant and bond is based on the income tax return from the second preceding year. (Example: Contribution made in 2009 – net income based on the taxable year of 2007.)

In other words, to ensure your child receives the maximum entitled grant and bond he/she should file taxes starting at age 17 (even though his income may be low or even non-existent) so that the grant and bond will be based on his/her low income status.

What To Do With An Unwanted RESP

Some of us opened an RESP for our child only to later realize they will not be attending post secondary education. It’s tempting to simply collapse the RESP but there is now a better option.

For the last couple of years an option to rollover some of the funds from an RESP to an RDSP has existed. To do this one of the following conditions must be met:

  • The individual has a severe and prolonged condition which will prevent him/her from attending post secondary education
  • The RESP itself must be at least 10 years old and the beneficiaries at least 21 years and not pursuing further education or
  • The RESP itself must have been in existence for 35 years

Once one of the above conditions has been met, the rollover will happen as follows:

  • The contributions will be returned to the subscriber (i.e. the parent) on a tax free basis
  • The savings bonds and grants will be returned to the government
  • The investment income will be transferred to the RDSP
  • The transfer will count toward the lifetime contribution limit of the RDSP
  • It will not attract a matching government grant
  • The funds will be taxable on withdrawal from the RDSP in the hands of the beneficiary

What does this mean for you?

  • If you have set up an RESP don’t panic as you are not going to lose your money
  • Don’t be in a rush to collapse the RESP as you may yet find a way to use the account.