Tax tips for 2009 tax year:
Make income tax time work for you
While the economy is expected to grow, it continues to be important when filing taxes for 2009 to take advantage of credits and refunds.
A good place to start is the information for people with disabilities on the Canada Revenue Agency (CRA) website at www.cra-arc.gc.ca, then 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 most people receive by mail with their tax forms, provides information about each line of the tax return. It is also available on the CRA website.
Another useful publication is called Services for People with Disabilities produced by Service Canada. It 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 at the right-hand side of the page. Or call 1-800-622-6232 to request a copy.
Registered Disability Savings Plan
The Registered Disability Savings Plan (RDSP) is in its second year of operation and more financial institutions are offering the product. The deadline to make contributions for the 2009 contribution year and to apply for the matching grant and income-tested bond was December 31, 2009. The RDSP is designed to encourage individuals to create protected savings plans for themselves or for persons with disabilities.
Eligible individuals must qualify for the Disability Tax Credit (see more information about the DTC below); have a valid social insurance number (SIN); be a resident of Canada; and be under the age of 60.
The RDSP includes matching grants from the federal government, subject to income, of up to $70,000 until the individual who holds the plan turns 50. For persons whose families do not have financial resources to contribute to a plan, the federal government will provide a bond of $1,000 per year for up to 20 years until the plan holder turns 50 years old.
Investment income earned in the plan will accumulate tax-free. However, grants, bonds, and investment income earned in the plan will be included in the beneficiary’s income for tax purposes when paid out of an RDSP. Contributions to an RDSP for a beneficiary are limited to a lifetime maximum of $200,000, with no annual limit.
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 or www.rdsp.com (English only) PLAN led the push for the development of the RDSP.
Working Income Tax Benefit
You could also consider whether you are eligible for the Working Income Tax Benefit (WITB). In addition, people who qualify for the disability amount (Disability Tax Credit) may claim an additional WITB disability supplement of up to $462.50 for 2009. You have to be eligible for the Disability Tax Credit to claim the supplement.
The WITB, which is a 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 amounts that can be claimed have risen substantially in 2009 compared to 2008. For 2009, 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 (depending upon where you live) that starts at $925 for single individuals without dependants, and $1,680 for families — couples and single parents. There is an additional supplement for people who qualify for the Disability Tax Credit. See charts below.
Chart 1 – Basic WITB amounts for all of Canada (excluding Quebec)
If you were a resident of Canada, excluding Quebec, this chart will help you determine if you are eligible to claim the basic WITB amount. Use the single amounts if you had neither an eligible spouse nor an eligible dependant. Otherwise, use the family amounts. If you were a resident of Quebec, see Chart 3 below.
Basic WITB amounts |
Canada (excluding Alberta, British Columbia, Nunavut and Quebec) |
Alberta |
British Columbia |
Nunavut |
Maximum benefit (single) |
$925 |
$1,010 |
$1,150 |
$580 |
Maximum benefit (family) |
$1,680 |
$1,515 |
$1,825 |
$1,160 |
Working income (single) |
more than $3,000 |
more than $2,760 |
more than $4,750 |
more than $6,000 |
Working income (family) |
more than $3,000 |
more than $2,760 |
more than $4,750 |
more than $6,000 |
Adjusted family net income (single) |
less than $16,667 |
less than $17,733 |
less than $18,265 |
less than $34,500 |
Adjusted family net income (family) |
less than $25,700 |
less than $25,100 |
less than $26,235 |
less than $40,000 |
Chart 2 – WITB disability supplement amounts for all of Canada (excluding Quebec)
If you were a resident of Canada, excluding Quebec, this chart will help you determine if you are eligible to claim the WITB disability supplement amount. Use the single amounts if you had neither an eligible spouse nor an eligible dependant. Otherwise, use the family amounts. If you were a resident of Quebec, see Chart 3.
| WITB disability supplement amounts |
Canada (excluding Alberta, British Columbia, Nunavut and Quebec) |
Alberta |
British Columbia |
Nunavut |
Maximum WITB disability supplement |
$462.50 |
$462.50 |
$515 |
$290 |
Disability supplement working income (single and family) |
more than $1,150 |
more than $910 |
more than $2,295 |
more than $4,800 |
Adjusted family net income (single) |
less than $19,750 |
less than $20,817 |
less than $21,294 |
less than $36,433 |
Adjusted family net income (family) |
less than $28,783 |
less than $28,183 |
less than $29,264 |
less than $41,933 |
Chart 3 – Basic WITB amounts and WITB disability supplement amounts for Quebec
If you were a resident of Quebec, this chart will help you determine if you are eligible to claim the basic WITB amount and the WITB disability supplement amount.
| Basic WITB amounts |
You had neither an eligible spouse nor an eligible dependant |
You had an eligible spouse but did not have an eligible dependant |
You did not have an eligible spouse but you had an eligible dependant |
You had both an eligible spouse and an eligible dependant |
Maximum benefit |
$1,552.67 |
$2,401.37 |
$908.88 |
$937.12 |
Working income |
more than $2,400 |
more than $3,600 |
more than $2,400 |
more than $3,600 |
Adjusted family net income |
less than $18,373.99 |
less than $28,298.34 |
less than $15,155.04 |
less than $20,977.09 |
WITB disability supplement amounts |
You had neither an eligible spouse nor an eligible dependant |
You had an eligible spouse but did not have an eligible dependant |
You did not have an eligible spouse but you had an eligible dependant |
You had both an eligible spouse and an eligible dependant |
Maximum WITB disability supplement |
$480 |
$480 |
$480 |
$480 |
Disability supplement working income |
more than $1,200 |
more than $1,200 |
more than $1,200 |
more than $1,200 |
Adjusted family net income |
less than $20,773.99 |
less than $30,698.34 |
less than $17,555.04 |
less than $23,377.09 |
(Source: Canada Revenue Agency website www.cra-arc.gc.ca/E/pub/tg/rc4227/rc4227-e.html)
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.
Allowable medical expenses
The list of expenses eligible for the Medical Expense Tax Credit for the 2009 tax year is available on the Canada Revenue Agency website. You can browse through eligible expenses at www.cra-arc.gc.ca by clicking "M" on the A to Z Index and then scroll down to Medical Expenses. Or for a complete list see the publication Medical and Disability-Related Information (RC4064). It is available on the Canada Revenue Agency website at: www.cra-arc.gc.ca/E/pub/tg/rc4064/README.html
In addition, for 2009 only, there is an additional home renovation tax credit that anyone can claim who has had eligible renovation expenses of more than $1,000, but not more than $10,000. It’s possible to double dip, claiming these amounts for the HRTC and as a medical expense. See more details below.
Most medical expenses require a prescription by a qualified practitioner. 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).
Medical expenses including 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. Sometimes it is more advantageous to split the medical expenses claim between the two spouses. 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.
Some renovations are eligible for medical expense tax credits where they are necessary and do not enhance the value of your home. Of interest to people with MS are expenses such as the cost of widening halls and doorways, lowering kitchen and/or bathroom cabinets and certain costs related to ramps, elevators or lifts. Where an actual elevator and shaft is installed, the cost of the elevator hardware that is prescribed by a qualified practitioner is viewed to be an eligible medical expense while the cost of installing the elevator shaft and the supporting structure is not.
At least one recent tax case allowed the difference in cost between building wider doorways and halls over the cost of standard doorways and halls, in a new home (rather than renovating an existing home) to be an eligible medical expense. This case even allowed the expenses for a person with a deteriorating condition who was not in need of the modifications at the time but whose prognosis indicated that the modifications would become necessary.
Refundable 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 lower than $3,116 or higher $44,973 (individual and spouse combined).
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 $1,067). For more information, see line 452 in the General Income Tax and Benefit Guide.
Disability Supports deduction
A disability supports deduction introduced in 2005 expanded the attendant care costs claimable on Line 215. Essentially, it expanded 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: www.cra-arc.gc.ca/E/pbg/tf/t929/README.html
Caregiver tax credit / Caregiver amount
If a parent, grandparent 65 or older, or an "infirm" dependent relative over 18 including a child, grandchild, brother, sister, niece, nephew, aunt, uncle, lives with you, you may be eligible for the caregiver amount, which is a credit based on up to $4,223. The dependent relative over 18 must either be an "infirm" adult, which would require certification by a qualified medical practitioner or a parent or grandparent over 65 years of age, i.e. born in 1945 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 / Disability amount
In 2005, eligibility requirements to qualify for the disability tax credit (DTC) were expanded, which benefitted 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].
Also, if you have already been approved for the DTC, your eligibility may expire if it is not renewed. You can check your approval notice from the CRA to determine in which year it expires. It is advisable to submit a new request well in advance of the end of the year in which your current approval expires.
Information is available as well at line 316 in The General Income Tax and Benefit Guide Find the DTC application Form T2201 on the CRA website at www.cra-arc.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 for an adult, and an additional $800 for a child for the full supplementary amount, 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. Also ensure that the CRA has the person making the claim documented as eligible for the transfer of the DTC credit. The eligible person may change from year to year and the credit transfer may be split.
Child disability benefit
The child disability benefit is a tax-free payment of up to $2,455 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. The child disability benefit allows families with a net income of $40,726 and one eligible child the full benefit. The amount is reduced by 2% of your adjusted family net income until it is eliminated at about $157,000 of adjusted family net income for one eligible child.
See the Guideline Table for more information when there are multiple dependants with a disability: www.cra-arc.gc.ca/bnfts/cdb_pymnt07-eng.html
Home Renovation Tax Credit
In addition to the possibility of claiming home renovation expenses related directly to improving access for a person with a severe and prolonged mobility impairment disability, these expenses or ones not related to improving access may be eligible for the Home Renovation Tax Credit.
You can claim an amount for eligible expenses incurred for work performed or goods acquired after January 27, 2009, and before February 1, 2010. The amount can only be claimed for the 2009 tax year and applies to eligible expenses of more than $1,000, but not more than $10,000. For more information, see line 368 in the General Income Tax and Benefit Guide.
Home Buyers Plan
The Home Buyers Plan allows first-time homebuyers to withdraw up to $25,000 for homes acquired after January 27, 2009 from their RRSPs on a tax-free basis to buy or build a home.
For a person who is disabled or for families which include a person who is disabled, you do not have to be a first-time homebuyer to qualify for the plan if the house is purchased by a person with a disability or to assist a person who is eligible for the disability tax credit. For example, a parent who owns a home could use up to $25,000 of his/her RRSP funds to help a child who is eligible for the DTC to purchase a home.
For more information, see publication RC4135 at www.cra-arc.gc.ca/E/pub/tg/rc4135/README.html
First Time Home Buyers Tax Credit
In addition to the Home Buyers Plan, there is also a home buyers tax credit of $5,000. It may be available to new first-time home buyers or for a house purchased by a person who is disabled or if purchased for a person who is disabled.
See more information at Line 369 at www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-04-09e.html#P1188_15701
Gasoline tax refund
People who are medically certified as having a permanent disability because of a permanent mobility impairment and who 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/E/pbg/ef/xe8/xe8-09b.pdf or call 1-877-432-5472.
In addition, some provinces have gasoline tax refunds for people with disabilities. Check with your own provincial government for information.
Premium assistance
Check with your provincial/territorial agencies for premium assistance with vehicle insurance and for provincial or territorial medical plans, 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 www.cra-arc.gc.ca/tx/ndvdls/sgmnts/dsblts/gsthst-tpstvh/menu-eng.html
RRSPs and RRIF’s
CPP disability benefits can be included when calculating base income for the RRSP contribution limit. To calculate your RRSP deduction limit for 2009, see Guide T4040, RRSPs and Other Registered Plans for Retirement.
RRSP’s must mature before the end of the year the annuitant turns 71 years of age (Prior to 2007 the age was 69). In the year of death, a loss subsequent to date of death may be carried back against income on the final return. See What’s new for RRSPs and related plans at www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/whtsnw-eng.html
Tax-Free Savings Account
Effective January 2009, a new investment account became available—the tax-free savings account. Capital gains and investment income earned within the account are not taxed, even when withdrawn. Contributions to a tax-free savings account are not tax-deductible, unlike contributions to an RRSP. The maximum contribution each year is $5,000. For more information, go to www.cra-arc.gc.ca and enter tax-free savings account into the search tool. Or contact your bank or other financial institution.
Health and Welfare Trusts
The CRA allows an employer to fund eligible medical expenses that are not covered by group or private insurance, without causing the amount to be a taxable benefit to the employee. If you are self employed and have incorporated your business, you may be able to pay for the uninsured portion of your medications, therapy and eligible devices as an eligible business expense, rather than having to use personal income. This is a complicated but beneficial approach that should not be used without qualified professional advice. More information can be obtained at www.cra-arc.gc.ca/E/pub/tp/it85r2/it85r2-e.html.
If you are self employed and pay premiums on Extended Health and Dental Plans, you may expense this premium on Form T2125 on Line 9270 along with Disability-Related Modifications if it’s more advantageous. Here’s the link: www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/t2125/ln9270-eng.html
Legacy Giving
Legacy gifts are a great way to reduce your income tax payable. Each type of legacy gift provides you with tax relief, either upon creation of the legacy gift or at some point in the future. Gifts in a will (otherwise known as bequests) are the most popular type of legacy gift. Bequests typically reduce your estate taxes. Gifts of life insurance are the second most popular type of legacy gifts. Depending on how it’s structured by your insurance company, these gifts can provide you with annual income tax relief in addition to reducing your estate taxes.
Legacy gifts like trusts can be structured 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, in addition to providing your estate with tax relief.
For more information on legacy gifts, visit www.MSlegacy.ca or call your local MS Society legacy giving expert at 1-800-268-7582. We encourage you to speak with your professional advisors when creating a legacy gift.
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 2009 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.
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.
Thank you to Eileen Reppenhagen, CGA, 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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