Tax Provisions That Can Help Defray Disability Costs

The pandemic has underscored the important role of caregiving in Canadian society.  But even before the pandemic 25% of Canadians aged 15 and older – close to 8 Million people- were involved in caregiving to a family member or friends with a long-term disability or age-related decline.  These caregivers have key unmet needs

; the most significant one tax and financial advisors can proactively help with, especially at year end, according to data from two surveys by Statistics Canada[1].  A checklist of conversation-starters follows.

According to the Stats Canada report updated in January 2022 and entitled, Differences in the characteristics of caregivers and caregiving arrangements of Canadians, 2018, the most common types of supports caregivers with unmet needs would like to receive are the following:

• financial support, government assistance, and tax credits (68%)
• home care or support (40%),
• information or advice (39%) and
• help from medical professionals (36%).

Financial advisors who work closely with their clients' tax advisors can assist in accessing more funds through the tax system.  Here’s a checklist of issues to discuss with your clients:

Changes to the Disability Tax Credit.  Check out the 16-page form T2201 Disability Tax Credit Certificate, which can now be completed by medical or nurse practitioners for all ailments, electronically.  New provisions starting with the 2021 tax year include an expanded list of mental functions and the fact that Type 1 Diabetics patients are now deemed to require at least 14 hours per week on life-sustaining therapy and therefore qualify for the Disability Tax Credit.

Disability-Related Investments:  The following investment opportunities are impacted by the presence of a disability:

• RRSP/RRIF transfers in the year of death to financially dependent children or grandchildren
• RRSP Home Buyers Plans, which can be tapped to move into a more disability-accessible home without meeting the usual first time home buyer limitations
• RDSP – individuals under the age of 50 will be eligible for added grants and bonds with each dollar contributed up to maximum thresholds.

Non-Refundable Tax Credits:  The following provisions may be impacted on the tax return as a result of a disability in the family:

*The Spousal Amount – which could be accessed for the first time if a disabled spouse’s income is sufficiently reduced.  

*The Eligible Dependant Amount (of significance to singles living with a dependant)

*The Disability Tax Credit (including transfers from Spouse)

*The Caregivers Amount – for spouses, minor children and disabled adult dependants

*The Medical Tax Credit – a wide range of costs including prescriptions, treatments from various medical practitioners and devices may be claimed

*The Multi-generational Home Renovation Tax Credit – available in 2023 this credit is 15% of up to $50,000 in renovation costs for a separate suite to accommodate seniors with a disability tax credit.

*The Home Accessibility Tax Credit – which has been doubled for 2022 and future years to $20,000.

Refundable Tax Credits. 

There are also a number of refundable tax credits that are impacted by the presence of a Disability Tax Credit including the Canada Child Disability Credit, the Canada Worker’s Disability Benefit and the Refundable Medical Expense Supplement..

Tax Deductions.

In addition, regardless of age, a childcare expense deduction of $11,000 may be claimable for a dependant, however there is a net income limitation for infirm dependants other than the taxpayer’s children.  There is also a Disability Supports Deduction for expenses that allow a disabled person to work go to school or do research.

Bottom Line:  You can help your clients access more financial support if they are providing care to others.  It’s a noble cause, especially at year end, when tax adjustments can also be made to prior filed returns.

Tips for Caregivers:  There are a number of complex criteria that come with each of these provisions, however, they can be worth thousands of dollars, depending on the individual circumstances that present themselves.  For these reasons, a visit to a tax specialist can pay off handsomely. 

Evelyn Jacks is Founder and President of Knowledge Bureau, holds the RWM™, MFA ™, MFA-P™ and DFA-Tax Services Specialist designations and is the best-selling author of 55 books on tax filing, planning and family wealth management.  Follow her on twitter @evelynjacks.

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