Raising children is always a challenge, all the more so when the child is disabled. To help with added expenses that may be incurred, parents and caregivers -- along with disabled adults themselves -- should be sure to take advantage of the various tax deductions and credits.
The primary deduction available to a disabled individual is the disability-support deduction, found on line 215 of the federal tax return. "This is available for disabled individuals with a mental or physical impairment who have incurred certain expenses that allow them to go to work or school. Expenses can be claimed to the extent of the income that they earn for the year," explains Frank Di Pietro, director of tax and estate planning for Mackenzie Financial.
While medical expenses (line 330) are available for everybody, more eligible items are available for disabled individuals. "If you have to pay for a dog, wheelchair, crutches, hearing aids or adapt a vehicle, these all qualify," says Di Pietro.
This year's budget also made some changes on what caregivers will be entitled to. Under current rules, a parent can claim medical expenses for herself and the child under 18, but when the child is over 18, there's a $10,000 limit. Starting with next year's tax return, the $10,000 limit will be eliminated.
In terms of the child-care deduction (line 214), parents or caregivers can claim up to $10,000 for disabled children who qualify for the disability tax credit. There is no age restriction.
What credits can be claimed depends on the family situation, type of care/support and the extent of the child's disability, says Di Pietro. For instance, to receive the disability tax credit, your child must have a severe and prolonged physical or mental impairment that restricts them from performing the basics of daily life (i.e. walking, speaking, hearing).
The disability should last for at least 12 consecutive months. To qualify, you'll need your child's disability certified by a medical doctor. Fill out form T2201 and submit it to the CRA, which ultimately decides if your child can claim the credit.
"In many cases, the disabled child doesn't have an income so he or she can transfer these credits to a parent or caregiver. Also, eligibility for the disabled tax credit opens the door to more tax credits," Di Pietro notes.
Eligible credits include the following.
Disability tax credit (reported on line 316 or line 318 if transferred to parent or caregiver): Available to those with severe disabilities, as defined above. In 2011, for those over age 18, the federal tax credit is $7,341, resulting in $1,100 in tax savings. A similar tax credit is also available provincially. For children under age 18, the disability tax credit is enhanced, amounting to $7,341 plus an additional disability supplement of $4,282, for a total of $11,623.
Tuition, education and textbook amount (line 323): In the case of disabled children attending post-secondary institutions, they may be able to claim full-time education amounts for part-time enrolment, enabling them to claim higher tax credits. The education amount is $400 per month, which can be claimed by the disabled child or transferred to a parent or caregiver.
Children's fitness amount (line 365): Parents can claim the registration costs for their disabled child's physical-education programs. They can claim up to $500 per child. If the child qualifies for the disability tax credit and is under 18, he/she gets an additional $500 if at least $100 is claimed in the program. Assuming the full $1,000 is claimed, that works out to $150 in tax savings per child.
Children's arts tax credit (coming in the 2011 tax year): This is for any arts-specific programs (i.e. painting, music class) where parents enrol their disabled child. The same rules apply as for the fitness tax credit, again resulting in tax savings of up to $150 per child if parents spend the full $500 and get the accompanying $500 benefit.
Family caregiver tax credit (coming in the 2011 tax year): "This is really just a supplement to some of the other dependency-related tax credits, such as the spousal or common-law partner credit, child tax credit, eligible dependant, caregiver and infirm-dependant credits," explains Di Pietro. The expected amount is $2,000, meaning $300 in additional tax savings.
Di Pietro notes that parents or caregivers can also claim up to two of these three credits.
- Eligible dependant (line 305): This is for those parents or caregivers who have no spouse or partner, and support a dependant who resides in their home, including those with a mental or physical infirmity. For 2011, the tax credit is $10,527, resulting in $1,580 of tax savings.
- Amounts for infirm dependants aged 18 or older (line 306): This credit is for disabled adults. For 2011, the amount to claim is $4,282, resulting in up to $642 in tax savings, subject to the dependant's income.
- Caregiver amount (line 315): If parents or caregivers are maintaining a house for their dependant child, they can claim this credit. Children must be age 18 or older and have a mental and physical infirmity to qualify. As with the credit for infirm dependants, the tax credit for caregivers for 2011 is $4,282 and the maximum tax savings is $642.
"The rules on what's available for disabled individuals and their families can sometimes be difficult to ascertain," says Di Pietro, "which is why I recommend consulting a tax professional."
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