• Life Events
  • Parenthood
  • Retiring
  • Death of Spouse
  • Divorce
  • Ailing Parent
  • Leaving a Job

Disabled Children

Tax Issues

Various tax deductions and credits may be claimed by the disabled child or their legal guardian. The rules relating to these benefits can be rather complex and they are interrelated. Your advisor can provide you with some additional information but you should consult a qualified tax professional when planning to make claims to ensure you are receiving the maximum tax advantage.

The Attendant Care Deduction

If your child meets the definition of disabled and requires the services of an attendant you may be able to claim some or all of the costs of the attendant. The attendant must be at least 18 and not a spouse. The deduction cannot be claimed where the expenses were claimed for the Medical Expense Tax Credit (explained below).

Child Disability Benefit

This benefit is available to families that are supporting a disabled child in their home. The child must be under age 18. The benefit in 2011 is $2,504 per child. This benefit is income tested and will be phased out at 2% of family income in excess of the National Child Benefit limit of $41,544 in 2011/2012. The benefit is fully phased out when family net income exceeds $166,744. The benefit can be transferred to a parent if the child cannot use it.

Disability Tax Credit

This credit is available for disabled persons and is 15% of $7,546 or $1,132 for 2012. This can be claimed by the child if possible or transferred to a supporting person such as a parent. Provincial credits are also available.

Disability Tax Credit Supplement

This credit is available to caregivers of disabled children under 18 and who require full time care in the home. In 2012 the maximum credit is $660.30 (15% x $4,402). The credit is reduced dollar for dollar where attendant care and child care expenses claimed for the child exceed $2,578.

Medical Expense Tax Credit

A credit for medical expenses not covered by other sources is available. The amount of the credit is for expenses in excess of the lesser of $2,109 or 3% of the person’s net income in 2012. The expenses can be claimed by a supporting person such as a parent. Provincial credits are also available.

Infirm Dependent Credit

Where your child is over 18 and dependent on you due to physical or mental infirmity you may be able to claim this credit. The amount of the credit depends on your child’s net income and is $6,402 in 2012. Provincial credits are also available.

Eligible Dependent Tax Credit

This credit is available where you are supporting a child in your home who is either under 18 or disabled and you are single and not receiving spousal support payments. The maximum credit in 2012 is based on a maximum amount of $10,822 yielding a credit of $1,623, but that amount is reduced by your child’s net income.

Registered Disability Savings Plans (RDSPs)

If a person meets the definition of disability pursuant to the Income Tax Act requirements then an RDSP may be established. The RDSP is a tax efficient mechanism for setting aside funds for a disabled person to use in the future to meet their income needs. The plan must be established by the disabled person or by a parent in the case of a minor or by a legal guardian if the person is not legally capable. The contributions made into the plan are not tax deductible like a Registered Retirement Savings Plan (RRSP) but the growth on the capital is tax-free in the plan until withdrawn. As well, the federal government will contribute grants to the plan in the form of Canada Disability Savings Grants (CDSGs). Lower income families may be eligible to receive additional government assistance through Canada Disability Savings Bonds (CDSBs). The maximum that can be contributed to a RDSP for a particular beneficiary is $200,000. Your advisor can provide you with more details on this plan.

The Home Buyers’ Plan (HBP) and Disabled Dependents

The Home Buyers’ Plan allows the owner of Registered Retirement Savings Plans (RRSPs) to withdraw funds to purchase a home from an RRSP with no immediate tax implications. Under the ordinary rules, the home must be a ‘first home’, generally defined as a residence of a person (and/or their spouse) who has not owned a home in the last five years. However, where a dependent child meets the definition of being disabled the rules are relaxed. If you have a child that is dependent on you due to a disability the HBP program can be used whether it is a first home or not. In other words, at any time, you can withdraw money from your RRSP for a new home provided the home will be used to improve the lifestyle of the disabled person. The rules regarding amounts that can be withdrawn and repayment are the same and you should contact your advisor or other tax professional for further information.