One of my Globe and Mail columns this week touched on disability planning in Canada. As usual, there is a word count limit on my columns that precludes an exhaustive examination of most topics. There are many more programs and tax relief considerations when it comes to disability planning. One of which is the Disability Tax Credit Certificate (DTC). A reader sent me an email that I thought was worth sharing. They requested anonymity, which I’m happy to provide to anyone who wishes to make a contribution to this blog with info worth sharing. Enjoy.

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Check out the Disability Tax Credit Certificate (DTC) through the CRA website.

It works much like a non-refundable tax credit (ie. lowest marginal tax rate credit, currently 15% federal''and depending on province). ''A person may be eligible for a permanent certificate or a temporary one''depending on the nature of the illness/disability. ''For instance, parents with a child with Type 2 diabetes''can be entitled to the credit on their personal T1 returns until the child has turned 16 ( I believe, don’t quote me on that age!).

Other people, such as the elderly with Alzheimers or terminal cancer, can received a permanent Certificate that they''can use each year on their T1 returns until death. The certificate is an all or none kind of proposition – either you are approved or not, and it is not pro-rated for a tax year.''If you become disabled on December 31, 2011 and are approved, you are entitled to use the FULL credit for the year 2011.

Example:

Taxpayer (BC resident) has Alzheimer’s disease dating back to 2008; subsequently dies in 2010. ''On her T1 returns for 2008, 2009, and the final 2010 T1 return the taxpayer can claim a federal Line 316 amount, Schedule 1

PLUS a provincial Line 5844 , Form BC428''as follows:

(NOT chump change for many Canadians).

There are some subtleties to this DTC:

• If the person is claiming nursing home costs under medical expenses, the maximum nursing home costs are $10,000 annually plus the DTC ''OR the full nursing home costs only – whatever is more beneficial to the taxpayer. ''So, for example, if the 2010 nursing home costs are $30,000 it obviously makes more sense to claim them in full and don’t utilize the DTC.
• Taxpayers must have a certified person, such as a physician, complete the CRA Certificate. ''They usually charge for this service (in the area of $50) but it can be claimed as a medical expense. ''The disability can be dated back several years and once approved, the taxpayer can ask to have their relevant T1 returns reassessed. ''It should be noted that if a DTC is approved back to 2007, say, the taxpayer cannot assume that CRA will automatically reassess. ''The taxpayer must request they do it. ''A bit quirky but CRA needs to know that the taxpayer wishes to use it. Offhand, I can’t remember ''how many years the CRA will go back retroactively.
• The DTC can be transferred to a spouse if that is more tax advantageous with restrictions (ie. your income is so low it doesn’t change your tax liability but would be useful to your spouse with a higher income).
• The credit amount for dependent children is supplemented so in fact is higher than the example given above.
• The parameters for being granted the DTC are not as strict as CPP disability pension, I have been told.

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Thanks for the insight and detailed comments… whoever you are. ;)