Disability Tax Credits are for Caregivers Too
By Doug Lagasse
If you are the caregiver of a person with a prolonged medical condition you may be eligible for some tax relief. In all circumstances you need to be a family member such a spouse, son, daughter, mother, father, uncle, aunt, nephew, niece, grandson and daughter, and in-laws. Living in the same residence as the person with the disability is not necessary providing some additional requirements are met.
There are numerous ways to obtain tax relief in the form of disability tax credits. What follows is a list of the most frequently used credits and some eligibility criteria. Because individual circumstances vary tremendously, and there are what I call “technicalities” lying in wait for the unwary, it is wise to obtain professional advice if you want to definitively establish eligibility and maximize results. This is one of those situations where not getting it right the first time creates difficult hurdles despite what the truth may be. All disability tax credits are only meant to reduce income tax.
All information presented in this article is meant for awareness purposes only and not meant to provide specific advice to readers. Seek guidance from an experienced accountant whenever your financial (expenses, eligibility of medical tax credits) situation changes. Truth and effort still prevail.
Disability Tax Credit (DTC – maximum tax reduction value is $1429.96 in 2006)
- Eligibility is based on having a marked restriction to daily living activities such as walking, dressing feeding, elimination, mental functions, sight, hearing, and life sustaining therapy. The application form needs to be completed by a medical practitioner.
- It is the effects of a medical condition that establish eligibility, not the diagnosis.
- Refunds can apply for up to ten years (since the condition became a marked restriction). Is that enough motivation to take a closer look?
- Family members of people with low or no taxable income can benefit from the transfer of the this credit to them. If the family member does not live in the same residence as the person with the disability then financial support must be provided and established to the satisfaction of the tax department (CRA).
- Ability to work or age are not qualifying factors.
- Be wary. Doctors frequently do not complete the application form correctly (for a large number of reasons) and the applicant may be denied due to a technicality, misunderstanding or inattention even if similar effects of the medical condition have qualified others. This is difficult because the patient seldom realizes this has occurred and it can get very messy to reapply.
Caregiver Tax Credit (maximum tax reduction value approx. $980)
This tax credit is in addition to the DTC.
- Eligibility is established by a short letter from a doctor indicating there is an infirmity, what it is and that care is required on a regular basis. No formal application (like the DTC) is required.
- In their wisdom legislators decided that this credit would not be available to spouses (remember the better or worse part of your vows) or common law partners. Other family members as described above can benefit.
- As well, this tax credit is income dependant. If the person with the infirmity makes over $17,363 this credit does not apply.
- If the person with the infirmity does not live with the family member providing support CRA will want to know that some financial assistance is provided by the person claiming the Caregiver Credit – which is now called the Infirm Dependent Credit. This financial assistance may be modest but must be consistent.
- The Caregiver Tax Credit can be claimed for any family member over 65 who lives with you and passes the income threshold criteria. No infirmity is required.
- Retroactive refunds can apply back to 1998.
Medical Expense Tax Credit
- Essentially, any expense that would not have occurred without a medical condition is likely to be characterized as a deductible medical expense. Common sense prevails. Look to the CRA website for a list of allowable medical expenses. Receipts are required.
- Large one time expenses should be accompanied by a note from a doctor indicating the condition and need for treatment or device resulting in the expense.
- Expenses can be transferred to dependent family members.
- Be aware of the threshold level of 3% of net income (for medical expenses) that defines the deductible amount. The actual amount of tax saved is a percentage of the distance between the sun and Pluto. That is to say, nowhere near what you spent, but it’s certainly better than nothing. The simplest approach is to submit your allowable expenses and let the tax department sort it out.
- Get advice for high recurring expenses, particularly care homes and attendant care. There are many variables to maximize results.
Doug Lagasse, of Ken Lagasse Chartered Accountants, can be reached at 604-629-1919, or Toll free: 1-866-829-4446 email@example.comIn the firm established Taxwise, a medical/disability tax solution division to ensure people with disabilities, and their families, receive all the tax credits and refunds to which they are entitled. www.taxwise.ca/.