Changes to Disability Tax Credit

The proposed 2021 Federal Budget has possible changes to how disabilities are evaluated. Specifically, “…update the list of mental functions of everyday life that is used for assessment for the Disability Tax Credit…”. When I first read the statement, I worried this was an attempt to shrink the pool, but I have been assured this is not the case.

A portion of the statement is as follows:

To help more families and people living with disabilities access the Disability Tax Credit, and other related support measures like the Registered Disability Savings Plan and the Child Disability Benefit: 

* Budget 2021 proposes to update the list of mental functions of everyday life that is used for assessment for the Disability Tax Credit. Using terms that are more clinically relevant would make it easier to be assessed, reduce delays, and improve access to benefits.

* Budget 2021 also proposes to recognize more activities in determining time spent on life-sustaining therapy and to reduce the minimum required frequency of therapy to qualify for the Disability Tax Credit. To ensure these changes enable applicants to have a fair and proper assessment of their eligibility for the Disability Tax Credit, the government will undertake a review of these changes in 2023.

It is estimated that, as a result of these measures, an additional 45,000 people will qualify for the Disability Tax Credit, and related benefit programs linked to its eligibility, each year. This represents $376 million in additional support over five years, starting in 2021-22.

Part 3: A Resilient and Inclusive Recovery

It is the final line of that statement that makes me less paranoid about this.

Caveat Disability Tax Credit

As with previous changes, these will not come into play until after the Budget (2021) is passed by parliament. What the results of the review ends up doing, remains to be seen. My concern is still with the “…Using terms that are more clinically relevant would make it easier….” phrase. This suggests the Doctor filling in the T2201 forms will need to know the correct vernacular for the forms.

  • The RDSP Page is the Overview of all articles I have written about the RDSP (including DTC and other areas).
    • RDSP : Laying the Ground Work (first things first)
      What needs to be done BEFORE you can apply for a Registered Disability Savings Plan? A major aspect of this is the Disability Tax Credit (DTC), make sure you click on this page to get started.
    • RDSP : Working with The Account
      Now that you have succeeded getting your Disability Tax Credit (DTC) you need to open an RDSP account with a bank or such, but how is that done? It is not as easy as you might think. This page outlines many of the issues that have arisen for my family working with an RDSP account.
    • Disability Tax Related Topics
      Thanks for my RDSP and DTC work I then had to learn a great deal about the tax implications of having a disabled child.
    • Autism Specific Articles
      Being the proud Father of a child on the Autism Spectrum I also ended up writing a great deal about Autism specific things as well.

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RDSP Grant Entitlement Statement 2021

Every year, an RDSP holder gets an update about how much money can be put into their RDSP. The Statement of Grant Entitlement, says how much money and how much the government will match, with a Grant.

RDSP Grant Entitlement 2021
RDSP Grant Entitlement 2021

As you can see this is an important piece of information. I now know, in 2021, I can deposit $1000 in my son’s RDSP and it will be matched with $1000 in grants.

This amount will increase once my son is over the age of 17, as the income they will use to determine the grant will be his income, instead of our household income. When he turns 18, his grants should be much higher, due to his estimated income at that age.

When he turns 18, my son will also have to re-qualify for his Disability Tax Credit as well. This is what we learned from the last time he had to re-qualify. Luckily the rules if he should not get a DTC right away, have changed.

Previous Posts on Grant Entitlements

  • 2020 Statement of Grant Entitlement
  • 2019 Statement of Grant Entitlement
  • 2018 Grant Discussions

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More RDSP Talk

A while ago I spoke with Tom Drake at Maple Money about the DTC and RDSP. After some judicious edit’ing Tom has published the Podcast here. As usual you can read about the RDSP on my Registered Disability Savings Plan page.

For those unaware there are a bunch of very smart folks that I use for research on this topic (my wife being a major contributor), and whenever I do one of these talks, I get a few things not quite right (and this is no difference). My source at ESDC (who is very patient and kind) points out a few of my fumbles: I mention that the program is 10 years old, it was started in 2008, so that is a 12 years in 2020.

RDSP and Bankruptcy

Doug Hoyes and I have discussed (on his Podcast) about the topic of RDSPs and bankruptcy, but my source now states clearly:

“The Bankruptcy Act was changed last year through the Budget Implementation Act.‎ See 67(1)(b.3) of the Insolvency and Bankruptcy Act.”

ESDC Source

134 Paragraph 67(1)‍(b.‍3) of the Act is replaced by the following:(b.‍3) without restricting the generality of paragraph (b), property in a registered retirement savings plan, a registered retirement income fund or a registered disability savings plan, as those expressions are defined in the Income Tax Act, or in any prescribed plan, other than property contributed to any such plan or fund in the 12 months before the date of bankruptcy,

Bill C-97

RDSP After DTC Lost

If the beneficiary loses their Disability Tax Credit (DTC), it used to be that the RDSP had to be closed. I waffled around this one with Tom, but the actual answer is:

“As of Budget day 2019, a RDSP n‎o longer is required to be closed due to loss of DTC. During a period when the beneficiary in not DTC eligible no contributions can be made to the plan except for the rollover of funds from a RRSP of a deceased parent or grandparent upon whom the beneficiary was dependent.  During a period of DTC eligibility, the beneficiary will not accumulate annual grant or bond entitlements. The Assistance Holdback Amount will be determined as the ten year period immediately prior to the beneficiary being DTC ineligible, and will remain that period until the end of the year the beneficiary turns 50. Each subsequent year the AHA will decrease by a year. (51-9 years, 52-8 years,… 59-1 year). The year the beneficiary turns 60, the AHA is nil. Should the benficiary requalify for the DTC, the plan will operate as normal.”

ESDC Source

So the money hangs around until the person turns 60 and then can be withdrawn, as Tom Drake pointed out should be the case.

Each time I talk about the Registered Disability Savings Plan and DTC I end up learning more myself.


EQ Bank Savings Plus Account

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Disability Tax Credit Policy Changes ?

Has the Disability Tax Credit policy changed? The CRA has not made any formal statement that the program has changed, however, the media implies otherwise. There seems to be an increase in stories about folks either having their applications denied or existing DTC holders having their certificates revoked.

A while ago we had to reapply for my son’s DTC and it seemed to go fine, however, that is far too small a data set to draw a conclusion from.

There have been stories of the CRA cracking down on false DTC claims (especially in the area of Autism and Brain disorders). There have been allegations that some “helping firms” have been supplying false applications, and the CRA is investigating these allegations.

There are also stories about an apparent change of policy for diabetics (with type 1 diabetes). If these folks are diagnosed under age 18 they are given the DTC, however, when they reach the age of majority, their DTC has been revoked (in some cases). The argument has been that their disability is not having a significant impact on their daily life (and that is the yard stick the CRA uses for disabilities).

My concern here is that there has not been any statement from the CRA or any apparent consultations with the public about this policy change.

For many folks disabilities there is no question, they are disabled, however there seems to be a push to revisit some areas. If the CRA chooses to change the rules for the DTC there is not much that can be done, aside from contacting your Member of Parliament, The Health Minister and the Minister in Charge of the CRA.

Policy Change ?

Does this apparent change in policy worry me. Yes, and my concern is not simply that my son may lose his “disabled” label (from the CRA), it is the apparent arbitrary nature that the new rules are being implemented, without public consultations.

The CRA can change the rules, but I think they should at least consult the public, or publish these new rules so we know what they are. A statement clarifying things would be helpful as well. It may well be that these are isolated cases, however, they may not be.

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CRA and me: Assessment Excitement

The summer of 2018, the CRA sent me a letter of assessment for my son’s school fees. These kind of assessments happen often. While I am slightly freaked out by them, it is still not a big deal. The letter asked for all associated documentation supporting my medical claim for my son’s school fees.

I dutifully collected all the receipts for the School and for my son’s Occupational Therapist. I wrote a cover letter outlining what I was sending and I sent it via registered mail to the CRA.

In that previous paragraph I made two mistakes (one small and one critical error):

  1. I could have easily scanned all the receipts and submitted them to the CRA on line. Much faster, and less expensive. Hopefully I will remember that for the next time.
  2. The letter asked for all associated documentation, and I misinterpreted that to mean receipts, and that caused a big problem.

 For those unaware, if your child is disabled you can claim their schooling or training as a medical expense. You must have a DTC first, and then ask permission of the CRA to be able to make that claim on your taxes. This is where my blunder took place.

My son had changed schools a while back, and I had never done a new letter outlining how his new school would help him with his disability (Autism Spectrum). Without this letter, and supporting documentation from his Doctor and other medical professionals, the CRA had every right to deny this claim on my taxes. As I did not include any supporting documentation with my assessment, the CRA denied my claim, and sent me a bill for what I owed.

The CRA was in the right to do this, and I was in the wrong for not sending it. I want to be clear on this point, I am not casting any shade on the CRA, they have actually been very helpful in this case.

It took a while, but I finally received my Assessment response via email, and I was shocked and upset to see the results(an over $4000 tax bill). After reading the email a few times, my wife read it and pointed out my mistake. She realized that I had not sent a new package outlining how the new school helped my son. I believe I sputtered and swore, but then came to the epiphany that my wife was right.

The past few weeks I have spent collecting the needed data and letters to support my claim for my son’s school expenses, and submitted them (electronically) to the CRA.

As the date of when I was supposed to pay my new tax bill came closer, I realized my reassessment was not going to be completed in time. Again, this was due to my procrastination, not the CRA inaction. I decided to call the CRA, and they directed me to their collections group.

When I spoke to the collections person, he brought up my file, I explained that I had submitted the needed documentation, and they decided to give me a 90-day extension on my due payment. This means I won’t have to fork out $4000 at Christmas time.

There is no guarantee that the CRA will accept my claim and documentation. Given the amount of supporting documentation I am hopeful that this is sufficient, but at least I won’t have to pay out a large sum of money now (that might be refunded later).

Conclusion

As I have said previously, if you don’t ask the answer is always no. I asked the CRA for clarification on what they needed, they provided that to me. The CRA also granted me an extension on payment, because I asked, and had a good set of reasons.

Sometimes the CRA screws up, but in this case, they are actually the heroes in this story (so far).

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