Income Tax Act

The Disability Tax Credit (DTC) is a modest tax measure to assist Canadians with physical and mental impairments facing additional costs not covered by the Medical Expense Tax Credit. The impairment must be severe and prolonged and markedly restrict the individual, or take the individual an inordinate amount of time, all or substantially all of the time, to perform a basic activity of daily living. Historically, these included vision, walking, speaking, hearing, feeding or dressing oneself, the elimination of body waste and mental functions.

In 2005, major reforms were made to theIncome Tax Act based on the recommendations of the report Disability Tax Fairness issued in December 2004 by the Technical Advisory Committee on Tax Measures for Persons with Disabilities.

Mental Functions

Prior to 2005, mental functions were defined as:

• perceiving,
• thinking, and
• remembering.

The interpretation of the legislation by the Canada Revenue Agency was very narrow and not appropriate for the majority of people living with severe mental impairments, making it virtually impossible for them to access the DTC.

In his landmark ruling, Radage v. Canada, former Chief Justice Donald G. H. Bowman of the Tax Court of Canada described disabling effects of mental impairments in a manner that no longer discriminated against a specific class of people. "There are certainly things that he (the Appellant's son) can do, but they are in my opinion outweighed by his severe intellectual limitations that render him incapable of performing such mental tasks as will enable him to function independently and with reasonable competence in everyday life."

In 2005, the Income Tax Act was amended, defining mental functions necessary for everyday life as:

• adaptive functioning (for example, abilities related to self-care, health and safety, abilities to initiate and respond to social interaction, and common, simple transactions);
• memory (for example, the ability to remember simple transactions, basic personal information, such as name and address, or material of importance and interest); and
• problem-solving, goal-setting, and judgment, taken together (for example, the ability to solve problems, set and keep goals and make appropriated decisions and judgments).

Life-sustaining Therapy

The DTC for life-sustaining therapy to support a vital function was introduced in 2000. The eligibility criteria required a patient to dedicate time at least three times a week, to an average of at least 14 hours per week. A child with type 1 diabetes requiring insulin injections was unable to meet the timeline, but if the insulin was being administered continuously by a pump, the child qualified for the DTC. In 2005, the legislation was amended to include all of the activities directly involved with the administration of the insulin dosage including testing blood glucose levels, supervising glucose testing during or after physical activity, and adjusting insulin dosages.

Cumulative Effect of Significant Restrictions

The new category recognizes that a patient might not meet the criteria of being markedly restricted in a single basic activity of daily living but is significantly restricted in two of more impairments, where the cumulative effects of these significant restrictions is equivalent to being markedly restricted in a single basic activity of daily living.