For those not aware, the Income Tax Act of Canada offers a non-refundable tax credit worth $8,235. For those with mental struggles like depression, bi-polar disorder, or ADD, the impairment requires it to be “severe or prolonged” where prolonged is defined as a continuous period of 12 months or more. If you have been receiving treatment for such a disorder, it would be wise to consider applying for the disability credit which we can help guide you at Agustus Tax Counselling.
The challenge for many is that while the impairments can be with us for most of our lives, the symptoms of these conditions are not continuous. CRA’s administrative policy requires the impairment to impact memory, problem solving, goal setting, and judgement for at least 90 percent of the time for at least 12 months. Compare this to a physical impairment, like the restricted mobility for waiting for a hip surgery, I find CRA’s administrative position to be limiting since the intent of the credit is to help those who cannot earn income in the same capacity as someone without the disability.
The ability to hold down a job with one of these impairments I would argue is more difficult than a physical impairment given the inconsistency of the presenting symptoms vs. the consistency most employers expect. That being said, most therapists or doctors know that the underlying condition is carried continuously therefore, while not guaranteed, they are more likely to approve the form needed to submit to the CRA.
A non-refundable credit means that you need to have paid taxes at some point in the year either as withheld taxes from your employment income or by paying personal installments throughout the year. This means that if you weren’t employed or made installments, then you will not receive any money back. That is what a non-refundable credit means.
If you did pay taxes or installments, the credit is not worth $8,235 in terms of a tax refund rather it will be $8,235 times your tax rate percentage. Say, for example, you are taxed at 30%, then you would receive 30% of the $8,235. I’m not going to go in detail on the marginal tax rate system but suffice to say it’s worth knowing that a tax credit needs a percentage to be applied to come up with a dollar amount you can expect to receive.
Should you wish to learn more about how the disability tax credit works in your case in a language that it easy to understand, please book an appointment at www.agustus.ca