CANADA DISABILITY TAX CREDIT

What is it?

Other potential benefits

DTC amounts

How is the credit claimed in UFile?

Transfer of the amount to a spouse or relative

Splitting transferred amount between multiple individuals

Identifying a transferee on the T2201

UFile steps to transfer the amount

Criteria for T2202 approval

Can’t claim DTC if attendant care or nursing home expenses claimed as medical expense

What are ‘activities of daily living’

What is the process for getting an approved T2201?

Getting help with a DTC application

Challenging a denial

Retroactive application of an approved certificate

Can a supporting person claim both the unused portion of their dependant’s disability credit amount and the caregiver credit?

What if a client isn’t sure if they have an approved disability tax credit?

Registered Disability Savings Plan

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What is it?

The Disability Tax Credit (DTC) is a large non-refundable credit available to individuals whose application to the CRA has been approved. The application, called the DTC Certificate (Form T2201), includes a detailed section that must be completed by a medical practitioner. To qualify, the individual must have a severe and prolonged impairment that significantly restricts their ability to perform a basic daily activity—such as walking, dressing, communicating, or mental functions.

Unused DTC amounts can be transferred to a supporting family member, such as a parent or spouse. It represents a substantial credit and also serves as a gateway to additional benefits.

Other potential benefits:

In addition to the DTC itself, having an approved T2201 can make you eligible for several other benefits:

• The new Disability Benefit, which can provide up to $200 per month.
• The Canada Child Disability Benefit, a supplement to the Canada Child Benefit, for parents of children with a DTC.
• A higher child care expense deduction for parents of a child with a DTC—up to $11,000, compared to the usual $5,000–$8,000.
• The Disability Supplement to the Canada Workers Benefit.
• Transfer of the credit amount to a spouse or other relative.
• In certain cases, attendant care expenses can be claimed as a medical expense that would otherwise not qualify.
• Eligibility for the Canada Home Accessibility Tax Credit, even if the individual is not a senior.
• The ability to open a Registered Disability Savings Plan (RDSP), which can trigger government contributions annually.
• Support for claiming the Schedule 5 caregiver credit (though the DTC itself is not required for this credit).

DTC Amounts?

• Federal amount: $9,872
• Ontario amount: $10,017

Supplement for persons under 18:

• Federal amount: $5,758. This supplement is reduced if total child care and attendant care expenses exceed $3,373; and eliminated if expenses exceed $9,131.
• Ontario amount: This supplement is reduced if total child care and attendant care expenses exceed $3,422; and eliminated if expenses exceed $9,265.

If the effective start date for the approval is part way through a tax year, the credit is prorated based on the portion of the year for which the approval is given.

How is the credit claimed in UFile?

1. Select the profile of the family member with the disability.
2. In the left-hand menu, go to Medical, disability, caregiver. Click the + next to Infirmity and Disability amounts claim for yourself.  
3. Enter a short name or description of the infirmity.
4. UFile will then assume the person has an approved T2201 and will calculate the credit in the Federal worksheet, entering the amount on Line  31600.
5. You do not need to answer the question, “Are you eligible for the disability amount of federal line 31600?” The default is set to claim disability amount, so leaving it blank will still assume eligibility.
6. You must answer whether the infirmity provides entitlement to the Canada Caregiver Amount. If “No,” the Disability Tax Credit will still be claimed. (The caregiver credit on Lines 30425, 30450, or 30455 is covered in a separate document.)
7. The credit amount will be reported on Line 31600.

Transfer of the amount to a spouse or relative:

If the person with the disability cannot use the full Disability Tax Credit (DTC), the unused portion can be transferred to a spouse.^[1] Alternatively it can be claimed by another relative who, in relation to the the individual with the disability:^[2]

1. Dependant Credit (Line 30400): Has claimed a dependant credit for a wholly dependent individual living in their home, where the supporting person does not have a spouse.
2. Adult Caregiver Credit (Line 30450): Has claimed an adult caregiver credit for an infirm adult dependant, who may or may not live with them, and where the supporting person is a parent, grandparent, child, grandchild, sibling, aunt, uncle, nephew, niece, or the spouse of such a relative.
3. Potential Claim: Could have made a claim under (1) or (2) if:

• The individual had no income for the year and was 18 or older by year-end, and
• In the case of (1), the supporting person did not have a spouse.

To determine eligibility, it is helpful to review the explanations for the Dependant Credit (Line 30400) and Adult Caregiver Credit (Line 30450), which are covered in another document.

Example: transferring the DTC of a minor child to either of two parents:.

• Option 1 does not apply because neither parent is single.
• Option 2 does not apply because the child is not an adult.
• Option 3 may apply: if the child had been 18 or older and had no income, each parent could have claimed the caregiver credit under option 2 on Line 30450, assuming the child is infirm.

Splitting the amount between multiple individuals:

If more than one person is entitled to receive a transferred Disability Tax Credit, the amount can be given to one person or divided among them.^[3] However, for separated or divorced parents, a parent who is paying child support cannot receive a transfer—unless both parents are paying child support to each other.

Identifying a Transferee on the T2201:

When completing a T2201 form, any known person who may claim a transfer of the credit should be listed in Part A, Question 2. If there are two supporting family members (for example, both parents), they can both be identified. Once the CRA approves the T2201, the MyCRA pages of the listed transferees will be updated to allow transfers.

Adding new Transferees after approval:

If a person with a DTC acquires a spouse, a transfer of the credit amount can be done without first adding the spouse.  

If a supporting family member other than a spouse was not identified on the original T2201, they should submit a signed written request to the CRA to be added. The request should briefly describe the support they provide for the basic necessities of life. Once processed, the family member’s MyCRA page will be updated to enable transfers.

UFile steps to transfer the amount

Transfer to a supporting family member:

1. In the dependent’s profile, go to Medical and disability and click the + next to Infirmity and Disability amounts for the dependant.
2. Complete Infirmity/disability section. 
3. For the question, “Is the dependent eligible for the disability amount on federal line 31600”, answer yes.
4. For the question, “Does the dependant’s infirmity provide entitlement to the Canada caregiver amount”, answer yes or no as applicable.
5. Ufile will automatically transfer any unused credit to the supporting family member, if they can use it. The amount used by the dependant will be reported on Line 31600 of their return, and the transferred amount will be reported on Line 31800 of the supporting person’s return.

Transfer to a spouse:

1. In the spouse’s profile with the disability, go to Medical, disability, caregiver, click the + next to Infirmity and Disability amounts claim for yourself.
2. Complete the Infirmity/disability section.
3. For the question, “Are you eligible for the disability amount on federal line 31600”, select Claim disability amount (default).
4. For the question, “Does this infirmity provide entitlement to the Canada caregiver amount”, answer yes or no as applicable.
5. Ufile will automatically transfer any unused credit to the supporting spouse, if they can use it. The transferred amount will be reported on Line 32600 of the transferee’s return, and a Schedule 2 will be generated. Note that Line 31600 will show the whole credit amount even if an amount is transferred. This may seem confusing, but if a transfer occurs, not all of the amount on Line 31600 is used even though reported.

Transfer of an amount when supporting person is not at the clinic:

1.        A client with low income and an approved DTC certificate may attend the clinic and advise that the person supporting them has filed their own tax return and claimed a transfer of the full DTC amount on Line 31800.

2.        In this case, should the client report the DTC amount on their return?  If the two people had done their returns together at the clinic, UFile would report $0 on Line 31600 (Disability for self). Therefore it may seem logical to report $0 by not claiming eligibility to the disability amount in UFile. However, the better choice is to claim eligibility. Although a credit amount will be reported on Line 31600, it won’t actually be used.

Criteria for T2201 approval:

A T2201 will be approved if these conditions are met:

1.        Severe and Prolonged Impairment^[4]

• The individual must have at least one severe and prolonged physical or mental impairment.
• “Severe” is not defined.  
• “Prolonged” means lasting continuously for at least 12 months.^[5] 

2.        Restrictions in Daily Activities:^[6]

The individual must be either:

(a)        Markedly restricted in their ability to perform a basic activity of daily living (ADL) or would be markedly restricted but for life-sustaining therapy; or

(b)        Significantly restricted in the ability to perform more than one basic ADL, where the cumulative effect of these restrictions is equivalent to being markedly restricted in one ADL.

3.        Medical Certification:^[7]

• They provide a medical practitioner’s certificate certifying items 1 and 2 above.

Additional Notes:

• Eligibility is based on the severity of the impairment and its impact on the person’s ability to perform ADLs, not on the diagnosis itself.
• A basic ADL  is considered “markedly restricted” if all or substantially all of the time—even with therapy, devices, or medication—the individual is blind or unable (or requires an inordinate amount of time) to perform the activity.^[8] 
• The CRA has interpreted “substantially all of the time” to mean approximately 90% of the time. This interpretation has been criticized and is not definitively supported by court decisions.^[9]

Can’t claim DTC if attendant care or nursing home expenses claimed as medical expense:

If attendant care or nursing home expenses are claimed as a medical expense for the person with the DTC, whether by that person or someone else, the DTC cannot be claimed or transferred.^[10]

What are ‘activities of daily living’?^[11]

1. Dressing oneself or feeding oneself.

Dressing oneself does not include identifying, finding, shopping for or otherwise procuring clothing. Feeding oneself does not include identifying, finding, shopping for or otherwise procuring food; or preparing food to the extent that the time associated with the activity would not have been necessary in the absence of a dietary restriction or regime.

2. speaking so as to be understood, in a quiet setting, by another person familiar with the individual,

3. hearing so as to understand, in a quiet setting, another person familiar with the individual,

4. eliminating (bowel or bladder functions), or

5. walking;

6. mental functions necessary for everyday life, including:

• attention,
• concentration,
• memory,
• judgement,
• perception of reality,
• problem solving,
• goal setting,
• regulation of behaviour and emotions,
• verbal and non-verbal comprehension, and
• adaptive functioning (how well a person handles common demands in life and how independent they are compared to others of similar age and background, regarding abilities that are related to self-care, health and safety, social skills and common simple transactions);

Other than the above, no other activity, including working, housekeeping or a social or recreational activity, is a basic activity of daily living.

What is the process for getting a T2201 approved?

The T2201 form has two parts:

• Part A: Completed by the person with the disability or their legal representative.
• Part B: Completed by a medical practitioner.

Both parts can be submitted online via My Account or on paper. If submitting by mail, the CRA recommends sending the completed form before filing a tax return.

For parents of a minor child, the T2201 can be uploaded to the parent’s account if the child is listed as a dependent on their CRA account.

After reviewing the form, the CRA may request additional information, including possibly a further report from the medical practitioner.

Once processed, the CRA will issue a Notice of Determination. Reportedly, about 96% of completed applications are approved.^[12]

Getting help with a DTC application:

There are companies and individuals who offer services to assist people with completing and submitting an application. However, caution should be exercised. In general, the reputation of this service industry is very poor.

At one point the government was considering passing a regulation to cap fees.^[13] 

Challenging a denial:

The CRA is not bound by a medical practitioner’s opinions. The CRA will conduct their own analysis, and may decline to approve a T2201 despite a doctor’s positive opinion. The certificate provisions have legal meanings that may not align with a layperson’s understanding or even that of a medical professional.

The steps for challenging a notice of determination are the same as the process for challenging a notice of assessment:^[14] 

1. Contact the CRA to discuss the decision.
2. Request a review, and if appropriate submit further medical information.
3. File an objection.
4. If the objection is denied, appeal to the Tax Court of Canada.

An example of a successful appeal is the decision in Jungen v. The Queen^[15], involving a child with severe ADHD.

Retroactive application of an approved certificate:

Form T2201 includes sections covering different types of physical and mental impairments. In each section, the medical practitioner is asked to indicate the year the impairment began. Based on this information, the CRA may approve a start date for the disability that predates the submission of the T2201—sometimes by many years.

If the approved start date falls in a prior tax year, the individual may choose to have the credit applied to past tax returns. Form T2201 includes a section where the applicant can request that the CRA automatically adjust prior-year returns to reflect the credit.

If the “Yes” box is checked on Form T2201, the CRA will automatically adjust prior tax returns to include the Disability Tax Credit (DTC).
If the “No” box is checked, the individual can later request the adjustment by contacting the CRA, using My Account, or filing T1-ADJ forms.

Note: The CRA will only make retroactive adjustments to add the DTC itself. However, having an approved DTC certificate may unlock other benefits, such as:

• Transfer of unused amounts to a spouse or supporting relative.
• The Child Disability Benefit, which adds several hundred dollars per month to the Canada Child Benefit.
• The Disability Supplement to the Canada Workers Benefit.

To claim these additional benefits retroactively—or to transfer unused amounts to a spouse or relative—T1-ADJ forms must be filed for the relevant years.

Can a supporting person claim both the unused portion of their dependant’s disability credit amount and the caregiver credit?

Yes. For example, consider an adult child with a disability, no income, and an approved T2201 who lives with their parent and depends on them for support. If the child’s full DTC is unused, it can be transferred to the parent. At the same time, the parent may also qualify for the Caregiver Credit (Line 30400). In this situation, both credits can be claimed. UFile will automatically apply both.

What if a client is unsure whether they have an approved disability tax credit?

With the client’s consent, this can be verified through their CRA My Account, accessed via the Represent a Client service. In My Account, select Benefits and Credits from the left-hand menu.

Registered Disability Savings Plan:

An RDSP is a savings plan for individuals who have been approved for the Disability Tax Credit (DTC).

Opening an RDSP:

• A parent can open an RDSP on behalf of a child approved for the DTC.
• A competent adult with an approved DTC can open their own plan.
• The individual with the approved DTC is the beneficiary of the plan.

Contributions:

• Anyone (e.g., the beneficiary, parents, or other family members) can contribute with the holder’s permission.
• Contributions are not tax deductible.
• The lifetime maximum (including government contributions) is $200,000.
• Contributions can be made until the end of the year in which the beneficiary turns 59.

Government Contributions:

1.   Canada Disability Savings Bond (CDSB):

• For low-income families, the government contributes $1,000 per year, up to $20,000 total. These contributions are ‘bonds’.
• No personal contributions are required to receive the bond.
• Bonds can be paid into an RDSP until the year the beneficiary turns 49.

2.   Canada Disability Savings Grant (CDSG):

• Government contribution is based on family income and the amount contributed by the beneficiary or individuals on their behalf.
• Government matches those contributions by up to 300%. These contributions are ‘grants’.
• Maximum grants are $3,500 per year, with a lifetime maximum of $70,000.

Withdrawals (Disability Assistance Payments – DAPs):

• Payments must begin by the end of the year in which the beneficiary turns 60.
• Portion of withdrawals that are contributions are not taxable.
• Portion of withdrawals that are bonds, grants, and investment income (including on contributions) are taxable to the beneficiary.
• Taxable amounts are reported in Box 131 (“Other Information”) of a T4A slip issued by the RDSP provider.

References:         

• Income Tax Act, s.118.3
• Income Tax Folio S1-F1-C2, Disability Tax Credit
• CRA website - Disability Tax Credit        
• CRA website - Transferring an amount, Line 31800
• RC4064 Disability-Related Information
• Form T2201 Disability Tax Credit Certificate        
• CRA website - Applying for a Disability Tax Credit Certificate
• CRA website - RDSPs
• RC4460 - RDSP
• 2024 Fifth Annual Report of the Disability Advisory Committee