Tax Tips: When filing taxes keep in mind
new Working Income Tax Benefit
A new tax benefit takes effect for the 2007 tax year – the
Working Income Tax Benefit (WITB). Taxpayers who qualify for
the disability amount may claim an additional WITB disability
supplement.
The refundable tax credit is designed to provide lower-income
taxpayers with a financial incentive to enter and/or remain a
part of the work force and to overcome the disincentive for people
who find that the net effect of taking a job is that they end
up poorer.
The WITB provides a refundable tax credit equal to 20% of each
dollar of earned income in excess of $3,000 to a maximum credit
of $500 for single individuals without dependants, and $1,000
for families — couples and single parents. The amount people
who qualify for the disability amount can claim depends on whether
or not they are claiming the basic WITB under the rules for taxpayers
who have an eligible spouse or eligible dependant.
For more information, go to the Canada Revenue Agency website
(www.cra-arc.gc.ca) and enter Working Income Tax Benefit in the
search function, or consult your tax professional.
Other helpful information
Other information for people with disabilities is on the CRA
website. Go to www.cra-arc.gc.ca and scroll down to People with
Disabilities listed on the left-hand side of the home page. In
addition, The General Income Tax and Benefit Guide, which many
people receive by mail with their tax return and forms, provides
information about each line of the tax return. It is also available
on the CRA website.
The publication called Services for People with Disabilities produced by Service Canada provides an overview of Government
of Canada services and programs for people with disabilities.
It includes information on employment, accessibility, education,
health, income support and tax benefits. It is available at www.pwd-online.ca or by calling 1-800-622-6232.
Allowable medical expenses
There are more than 123 different medical expenses, devices and
equipment that can be claimed as medical expenses for those who
qualify. Medical expense deductions of particular interest to
people with MS are prescription medications, medical and assistive
devices and half the cost of an air conditioner if prescribed
(maximum $1,000).
Those premiums paid out of your net pay or privately for your
extended health and dental plan can be claimed by either spouse,
usually the one with the lower net income as the 3% threshold
is lower for the lower income spouse. Also claimable is the uninsured
portion of the claim for reimbursement of expenses and the uninsured
dental costs under your or your spouse’s private health
plan.
See the complete list in the publication Medical and Disability-Related
Information (RC4064). It is available on the Canada Revenue
Agency website at: http://www.cra-arc.gc.ca/E/pub/tg/rc4064/README.html
Medical expense supplement
Individuals with high medical expenses and a low family income
may be eligible for a refundable medical expense supplement.
To qualify, the individual net income cannot be higher $43,067
(individual and spouse combined). The calculation has changed
and includes an adjustment for the Universal Child Care Benefit.
If you pay income tax, you can claim the supplement as a tax
credit to reduce your taxes. If you don't pay income tax, you
may receive a refund for medical expenses (up to $1,000). For
more information, see line 452 in the General Income Tax
and Benefit Guide.
Disability support deduction
A new disability support deduction was introduced in 2005. Essentially,
the changes increase the list of eligible expenses that can be
deducted from income, rather than claimed as a tax credit by
people with physical or mental impairments for products or services
related to working or going to school. Please note, you cannot
claim these expenses if you or someone else will be claiming
them as a medical expense.
These expenses do not transfer or carry forward and must be used
against the income of the person with the disability. If these
expenses are not able to be used by the person with the disability,
they may still qualify to be used by their spouse as a medical
expense tax credit. See Form T929 for more information at this
link on the CRA website: http://www.cra-arc.gc.ca/E/pbg/tf/t929/README.html
Caregiver tax credit / Caregiver amount
If a parent, grandparent or "infirm" dependent relative
lives with you, you may be eligible for the caregiver amount,
which is a credit up to $10,000. The dependent relative must
either be an "infirm" adult, which would require certification
by a qualified medical practitioner or born in 1941 or earlier.
Spouses are not eligible for this amount. For more information
see line 315 in the General Income Tax and Benefit Guide.
Disability tax credit
In 2005, eligibility requirements to qualify for the disability
tax credit (DTC) were expanded, which should benefit a number
of people with MS. People who have multiple impairments that
have a cumulative effect of being severe and prolonged should
be able to qualify for the DTC. In addition, eligibility requirements
for impairments that are intermittent (such as MS symptoms) have
been clarified.
Despite these changes, persistence is important in ensuring the
application for the DTC is approved. Sometimes you may need to
discuss with your physician or other qualified person the type
of information that is needed on the application form to assist
in a successful application. For more information about the DTC
process, see the section on taxes in the MS Society publication
A Guide to Employment and Income Support, available at www.mssociety.ca,
search words [employment and income support].
Information is available as well at line 316 in the The General
Income Tax and Benefit Guide or the DTC application Form T2201
on the CRA website http://www.craarc.gc.ca/E/pbg/tf/t2201/README.html
If you qualify, the amount of taxes you or a supporting person
pay will be reduced by a non-refundable tax credit. If you qualified
for the credit and should have claimed it in the past, you may,
under the fairness provisions, ask for your tax returns to be
adjusted for the previous ten years. At about $1,400 possible
refund per year, this is a substantial refund of tax paid for
the person with a disability or supportive family. Care must be
taken if you decide to ask for previous tax returns to be adjusted.
You will need to ensure that all income has been claimed previously
in those years, and you have available all the necessary documentation.
Child disability benefit
The child disability benefit is a tax-free payment of up to $2,300 per year
for families who care for a child under age 18 with a severe and prolonged
impairment in mental or physical functions. The child must qualify for the
disability tax credit. Recent changes to the child disability benefit allow
families with a net income up to $156,928 to qualify (previously it was $55,230).
Gasoline tax refund
People who are medically certified as having a permanent disability because
of a mobility impairment and cannot safely use public transportation can apply
for a refund of part of the federal excise tax on gasoline. See Information
Sheet XE8, Federal Excise Gasoline Tax Refund Program at www.cra.arc.gc.ca/disability or call 1-800-959-5525.
In addition, some provinces have gasoline tax refunds for people with disabilities.
Check with your own provincial government for information.
GST/HST exemptions and rebate
Health care services and medical devices and supplies are either exempt or
zero-rated for the goods and services tax/ harmonized sales tax (GST/HST).
In addition, when you buy a vehicle that has been modified for a person with
certain disabilities or have those modifications made, you should be able to
claim the portion of the GST related to the modifications. See Form GST518
for more information available at http://www.cra-arc.gc.ca/tax/individuals/segments/disabilities/gst-hst/menu-e.html.
Home Buyers Plan
The Home Buyers Plan allows first-time homebuyers to withdraw up to $20,000
from their RRSPs on a tax-free basis to buy or build a home. In addition and
of particular interest to families which include a person who is disabled,
you can use up to $20,000 from an RRSP to buy or construct a house that is
accessible for yourself (if disabled) or a related person who meets the criteria
for being disabled under the program.
For more information, see publication RC4135 at http://www.cra-arc.gc.ca/E/pub/tg/rc4135/README.html
RRSPs
CPP disability benefits can be included when calculating base income for the
RRSP contribution limit. To calculate your RRSP deduction limit for 2007, see
Guide T4040, RRSPs and Other Registered Plans for Retirement.
RDSP
The new Registered Disability Savings Plan (RDSP) received Royal Assent in
December in 2007. It is anticipated it will become operational by December
2008. The RDSP is designed to encourage individuals to create protected savings
plans for persons with disabilities. It is modelled after the Registered Education
Savings Plan and includes matching grants from the federal government, subject
to some limitations. And for persons with income less than about $20,000, a
bond of $1,000 per year for up to 20 years for persons who qualify for the
Disability Tax Credit and are under 49 years of age.
For more information, go to the CRA website at www.cra-arc.gc.ca and enter
Registered Disability Savings Plan into the search function. Another good source
of information is the website of Planned Lifetime Advocacy Network (PLAN) at
www.plan.ca. Plan led the push for the development of the RDSP. is a non-profit
organization, established in 1989 by and for families committed to future planning
and securing a good life for their relative with a disability. It will be necessary
for the person with the disability to have a will in order to ensure that their
RDSP is disposed of the way they wish it to be by the executor of their estate.
Estate planning
Estate planning is an important part of any financial plan. Regardless of your
stage in life, it is a good idea to have a will. This ensures the smooth distribution
of your possessions to the beneficiaries of your choice. Planning that involves
a gift to charity (such as the MS Society of Canada) is also a good way to
reduce estate taxes.
There are also ways to create trusts to ensure that a child with a disability
has the benefit of tax savings, government assistance and access to inheritance
in an efficient and prudent manner. You would need to speak to a tax specialist
for more information on this type of planning.
Tax relief for donations
Charitable giving is a great way to reduce overall taxes (it's also a great
way to support the MS Society of Canada). Be sure to claim your 2007 donations
(with receipts) and any unclaimed donations in the past five years on your
tax form.
Tips and more information
Ensure you have all the information you need: keep a file with all tax information
and receipts; keep track of your investments; prepare your own schedules of
employment expenses, donations and medical receipts to reduce external preparation
costs.
The MS Society of Canada's MS Bequest Help Desk is a good place for estate
planning information (1-866-679-4557) or www.msbequesthelpdesk.ca
CRA offers a free Community Volunteer Income Tax Program. The trained volunteers
can help people with low incomes and simple tax situations. For more information
about the free program, call 1-800-959-8281.
The tax information provided here may not consider all possible
complications and should be considered as general advice only.
Contact your own tax or financial advisor for individual advice.
If you would like assistance finding a financial advisor call
the MS Bequest Help Desk at 1-866-679-4557.
Thank you to Eileen Reppenhagen, CGA, and Peter Weissman, CA,
TEP, for assistance in updating this article. Additional tax
information and articles can be found
at Eileen Reppenhagen’s website: www.taxdetective.ca
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