Nov
12
By Fin MacDonald
The various tax systems recognize, to a certain extent, the extra costs borne by people with disabilities and make provisions to help. Each tax system has it's own requirements for people to qualify for this help. In this month's article I will look at two tax systems - Provincial Fuel Tax Refund and the Federal Income Tax System.
Provincial Fuel Tax Refund
The Province of British Columbia collects tax on gasoline and diesel fuel used for motor vehicles. In the Capital Regional District the amount is 18 cents per litre for gas and 18.5 cents per litre for diesel. In the Greater Vancouver District the amounts are 23.5, and 24 cents per litre; in the rest of BC it is 14.5 and 15 cents per litre. (There is also a Federal program but the rebate is only 1.5 cents per litre - for 1000 litres the refund would be only $15.00, compared to $180 from the Province. The Federal program does not include diesel.) The Provincial program rebates all the tax collected to a maximum of $500 per year; the federal only a small portion. Over the years, none of my clients have registered for the Federal program due to it's tiny payments.
The requirements for the Provincial program are one of the following:
- You have lost a limb.
- You are permanently dependent on a wheelchair.
- You have complete and permanent functional loss of the lower limbs.
- Your doctor or nurse practitioner certifies that you suffer from permanent impairment of movement to the extent that it would be hazardous for you to use public transportation (whether or not public transportation is available).
- Your doctor or nurse practitioner certifies that you have a permanent mental disability to the extent that it would be hazardous for you to use public transportation (whether or not public transportation is available).
- You are in receipt of either a 100% Disability Veteran's Affairs Pension or Disability Benefits from the Province.
The form signed by a Medical Doctor or a Nurse Practitioner or for DVA or Social Services, a letter indicating your Pension or Disability Benefits, would serve to qualify you for the fuel tax refund.
Federal Disability Tax Credit
The Federal Disability Tax Credit (DTC) is a gateway to both Income Tax decreases and other programs.
The requirements to qualify for the DTC are:
The effects of your impairment cause you to be markedly restricted in one of the following basic activities of daily living, even with the appropriate therapy, medication, and devices: speaking, hearing, walking, elimination (bowel or bladder functions), feeding, dressing or mental functions necessary for everyday life.
Markedly restricted means 85% or more of the time. If you are not Markedly restricted in just one of the tasks of daily living but are Significantly restricted in two or more of the above to the extent that you are Markedly restricted in the activities of daily, you may also qualify.
Some people apply repeatedly for the DTC. Often times the person's doctor does not realise the wording that the Canada Revenue Agency requires, other times the person's qualification for the DTC has not been recognized by either the person or their doctor.
Over the last 10 years I have helped over 40 people to successfully apply for the DTC.
Benefits of having the Disability Tax Credit
Once the DTC is approved, and it may be approved for a period of up to 10 years prior, many avenues for tax savings open up. The tax savings per year are approximately $1400. If one is not taxable, or cannot use the full amount of the deduction, the balance can be transferred to another supporting person such as a spouse, parent or son or daughter.
An example of this is when an adult child with the DTC is supported by one of her parents. The DTC is transferred to the parent who then saves $1400 on their taxes. If the person with the DTC is under 19 the amount available is $11,623, which raises the tax benefits to $2500.
The DTC permits up to $10,000 in attendant care expenses to be claimed, in addition to the DTC. If the attendant care expenses exceed the $10,000 plus the $7,341 (2011 amount) of the DTC, then the whole amount may be claimed.
Registered Disability Savings Plan
The Registered Disability Savings Plan is a recent program that allows for tax free savings and contributions from government for people with the DTC. Contributions may be made from birth to the end of the year the person turns 49. Payments must commence by the end of the year the person turns 60.
Contributions to RDSPs are not tax deductible. When the proceeds are withdrawn after age 60 the grant, bond and earned income portion of the payment is taxable; the portion related to contributions is not.
The rules for the Disability Savings Grants and Bonds are intricate and are income tested. The Federal Government provides a series of Bonds and Grants to those who qualify. The maximum benefit is obtained by those with a net family income of less than $24,183. At that level, a Bond of $1,000 per year, with a life-time limit of $20,000 can be paid with no contribution required. The Grant for a person below the $24,183 is up to $3,500 per year, based on contributions of $1,500, with a life-time maximum of $70,000. So, up to $90,000 in Federal contributions can be attracted by the RDSP! Most banks and life insurance companies now offer the RDSP.
Disability Supports Deduction
The Disability Supports Deduction provides for a deduction from income of up to $15,000 in disability related costs that enable a person with the DTC to go to school or be employed or self-employed. This deduction cannot be transferred to a supporting person or carried forward to another year. This is a rarely claimed deduction; in 20 years of Income Tax Preparation I have only known 2 people who were able to take advantage of this; and because of their already low income the benefit was small.
Coming next month - Year End Tax Planning - I'll look at things you can do to Keep More of Your Money!