The Disability Tax Credit (DTC) comes in the form of a non-refundable tax credit. This means that you must actually pay taxes in order to have this tax credit reduce your tax bill. If your tax bill for the year is already zero, this tax break will not assist you. The DTC is worth about $2284 per year.
You may also hear the DTC referred to as “The Disability Amount”.
How do I claim it?
I highly recommend using tax software such as TurboTax or Ufile which makes the procedure as easy as ticking a box.
When you are entering information about your dependants, there will be a selection that you can make to indicate that you wish to claim the “Disability Amount Transferred from a Dependant”. Of course you will tick “Yes” and at some point indicate which spouse will claim the amount. As a general rule, the higher income spouse will claim the amount. The software may warn you that should file a T2201, but of course you have already done that. All the calculations are then done automatically on the Federal and Provincial forms.
Can this tax credit be back dated?
Yes! The first step in the process is to apply for the Disability Tax Credit using the form T2201. See my page Disability Tax Credit Certificate for more details. The response from CRA will indicate the effective date of the disability.
Starting in 2016, the T2201 form includes the option to have CRA automatically adjust for previous tax years with respect to the Disability Amount. For other credits, you will have to use the T1-ADJ form, which is only one page and very easy to fill out.
You may be able to go back ten years under the taxpayer relief provisions. It is important that the medical practitioner indicate when the condition originated.
For a more detailed look at back dating tax credits, please refer to Milburn’s Excellent Guide to Back Dating Disability Credits.
What if my child can’t use the non-refundable tax credit?
This tax credit is obviously useless to the child who has no income, but the disability amount can be transferred to a parent.
The phrase used in the tax form is “Disability Amount Transferred from a Dependant”.