The Disability Tax Credit (DTC) is a federal program operated by Revenue Canada, and it has two main benefits for people with disabilities. First, it can be used as a tax credit, either by the disabled person or by a family member who is their caregiver. As a tax credit, the DTC generally only benefits those with a middle to high income, who earn enough to pay income tax in the first place. A person who is approved for the DTC (or their family member) can also ask Canada Revenue Agency to re-assess the last 10 years of their income taxes, which could trigger a significant income tax refund.
The second benefit of the DTC is that it allows an individual to open a Registered Disability Savings Plan (RDSP). If you are on a low income, the federal government will contribute a grant of $1000 per year to your RDSP until the year you turn 49. For individuals who are able to make their own financial contributions, there is a system of matching federal bonds that can see your personal contribution doubled or even tripled.
Meeting the Eligibility Criteria
To be approved for the DTC, an applicant must have either a marked restriction in one activity of daily living, or significant restrictions in two or more activities of daily living, resulting in cumulative impacts. The person must be unable to complete the activity, or the activity must take them an inordinate amount of time to complete. These restrictions (or combination of restrictions) must be present at least 90 percent of the time. For several years, only physical limitations were considered. Advocates and individuals with mental health disorders and their family members lobbied the federal government for years, arguing successfully through appeals to the Tax Court of Canada that the DTC was unfairly discriminatory towards applicants with mental health disorders. It wasn’t until 2005 that mental function was fully incorporated into the DTC application.
The DTC is one of the more complex disability-related applications, requiring a significant amount of detail, provided and verified by a medical professional. As a federal disability advocate, I help individuals with disabilities apply for the DTC. Let’s break down what each sub-category of Mental Function means in reality.
This sub-category relates to how well a person interacts with others and their environment, including their ability to process written, visual, or auditory information. People with various mental health disorders, including mood (anxiety, depression), psychiatric (schizophrenia), and developmental (ADHD, autism) disorders, can have great difficulty initiating, comprehending, and engaging in various forms of communication. Adaptive Functioning also considers how a person regulates their own self-care, including managing their hygiene, dressing appropriately, responding to medical emergencies (for example, going to the hospital after sustaining an injury), managing their medications, and regulating their diet (eating disorders would fall under this heading). Again, for many individuals with mental health disorders, their ability to do these types of tasks on a daily basis can be severely impacted, particularly by such symptoms as erratic moods and low motivation. This sub-category also considers a person’s ability to complete basic social transactions like making medical appointments, going grocery shopping, leaving the house for basic errands, and going to the bank.
This sub-category is concerned with how well a person is able to learn and recall basic information, including names, birthdates, addresses and phone numbers, directions, recipes, and general information. This activity can be particularly impacted by many mental health disorders, as well as traumatic brain injuries. If a person needs to rely on another person, a written account, or technology (for example, a computer or phone) at least 90 percent of the time, their memory would likely be considered markedly restricted.
Problem-solving, goal-setting, and judgement
For this last sub-category a person must have restrictions in all three areas—problem-solving and goal-setting and judgement. Many mental health disorders cause mood swings, cognitive distortions, intrusive and disordered thoughts, poor insight and impulse control, and low motivation; some people with mental illness may exhibit volatile or erratic emotions and behaviours, paranoid thinking, self-imposed isolation from friends and family, an inability to ask for help, inappropriate responses to unexpected demands (for example, excessive anger/hostility, emotional outbursts), and thoughts of self-harm. Any of these can interfere with a person’s ability to use their judgement to complete basic tasks, make simple decisions, and problem-solve in unexpected situations.
Approval for the DTC is not based on a specific medical diagnosis, but instead on the level of restrictions (marked or significant) in a person’s life. If a person’s symptoms are relatively well managed by the use of assistive devices, therapies, or medications, resulting in little to no restrictions, they will not be found eligible for the DTC, even if they have a serious mental health disorder.
Applicants whose restrictions may be periodic or episodic, meaning that on paper they might not reach the threshold of being restricted 90 percent of the time, face particular difficulty qualifying for the DTC. However, legal challenges through the Tax Court of Canada have successfully argued that the 90 percent threshold is an unfair, and mathematically impossible, benchmark to measure. Keep in mind, though, that applications are decided individually and the decisions from these court cases are not binding on future DTC adjudications.
While challenging, it is possible to apply successfully for the DTC under the category of Mental Function, provided you have a supportive medical practitioner and an understanding of how your restrictions meet the eligibility criteria. The legal advocates in TAPS’ Federal Disability Advocacy Project (FDAP) are available to meet with you and help you draft a detailed and comprehensive report describing how your disability affects you. If you think you might be eligible for the DTC and would like help applying, contact Caitlin or Daniel at TAPS at 250-361-3521.