Disability Tax Credit and type 1 diabetes

UPDATE (Oct 24, 2017): JDRF believes the Canada Revenue Agency (CRA) interpretation of the rules regarding life-sustaining therapy has now changed, resulting in many Canadians with type 1 diabetes being denied the tax relief they're eligible for under the Disability Tax Credit. On October 20, JDRF addressed members of Canada’s Standing Committee on Finance, advocating to make this benefit more widely available to all Canadians living with type 1 diabetes. The CRA has invited JDRF to meet on October 25 to discuss this issue further. Find out more in this press release.

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Are you eligible for the tax breaks?

January 2, 2017

As everyone living with type 1 diabetes (T1D) and their caregivers know, managing the disease can be very costly. The Government of Canada offers some help with this expense, because it officially recognizes T1D as a disability. This allows people living with the disease to apply for a Disability Tax Credit (DTC) and leverage other cost-saving programs.

What is the Disability Tax Credit?

The DTC is a program designed to help those with disabilities or their caregivers reduce the amount of income tax they pay, offsetting some of the significant medical and treatment expenses.

To qualify for the DTC, an individual’s health care provider must submit a T2201 form to the Canada Revenue Agency (CRA), certifying that the disability causes severe and prolonged impairment and describing its impact on their patient’s life. Once approved, the disability amount can be claimed on the individual’s (or their caregiver’s) tax return.

“The disability tax credit (DTC) is a nonrefundable tax credit used to reduce the income tax you pay. It's available for people with a severe and prolonged physical or mental impairment, subject to approval by the Canada Revenue Agency (CRA). A claim will result in a refund of approximately $2,000 for a dependent under 18 years of age,” says Kevin Fretz, an accountant with Robert Gore & Associates, a chartered professional accounting firm in Toronto.

Who qualifies?

Parents of children with T1D, spouses or common-law partners of people living with T1D, and individuals over the age of 18 with T1D can apply.

In addition, if a person was eligible for the DTC for previous years but had not yet claimed the disability amount when the return was filed, an adjustment can be requested for up to 10 years by filing a T1 ADJ form. To claim the disability amount for those prior years, the person with T1D or their caregiver can ask for a reassessment.

What diabetes-related activities are covered?

To qualify for the DTC you must spend a minimum of 14 hours per week on activities directly related to managing your T1D.

“With children, the 14-hour-per-week eligibility criteria can usually be met by combining the parent and child’s time,” says Fretz.

According to the CRA website, the following activities qualify in the 14-hour-per-week calculation:

  • Checking blood glucose levels
  • Preparing and administering the insulin
  • Calibrating necessary equipment
  • Testing ketones
  • Keeping a log book of blood glucose levels

Activities not included:

  • The time that a device (such as an insulin pump) takes to deliver therapy
  • Counting carbohydrates
  • Exercising
  • Travel time to receive therapy
  • Going to medical appointments
  • Buying medication
  • Recuperation after therapy

What other government programs are available?

Some other programs that may be useful for people with T1D include the Registered Disability Savings Plan (RDSP), Canada Disability Savings Grant, and Canada Disability Savings Bond.

Similar to the Registered Retirement Savings Plan (RRSP), the RDSP is designed to help people with T1D (or their parents) plan for their future. If the person is eligible for the DTC, contributions can be made to an RDSP (which are not tax deductible), until the end of the year in which the beneficiary turns 59.

For those who have an RDSP, the government will pay a matching Canada Disability Savings Grant of between 100 and 300%, depending on family income and the amount contributed. The government may contribute a maximum of $3,500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime.

They will also pay a Canada Disability Savings Bond of up to $1,000 per year to low-income Canadians with disabilities. No contributions need to be made in order to obtain the bond, and the bond can be paid into an RDSP until the year the beneficiary turns 49. The lifetime bond limit is $20,000.

T1D is an expensive disease, but these programs can provide some financial relief for those who qualify.

To download forms or to get more information about which programs are right for you or your loved one with T1D, see the CRA website or consult a tax specialist.

Reference

  1. Eligibility Criteria for the Disability Tax Credit. Accessed Dec 28, 2016.
  2. Canada Disability Savings Grants and Bonds. Employment and Social Development Canada. Accessed Dec 29, 2016.

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