Disability credits and deductions enhanced by the federal budget

Submitted By Lu Galasso

The 2000 Federal Mini Budget enhanced the disability, and medical expense tax credits. as well as the attendant care. and child care deduction. The Budget proposals are outlined
below.

Disability Tax Credit

Currrently the disability tax credit is available only to an individual who is unable. or who requires an inordinate amount of time. to perform one of a prescribed list of basic
activities of daily living, even with the aid of therapy and the use of appropriate devices and medication. The Budgetproposes to extend the benefit of the disability tax credit to those individuals who are capable of performing a basic activity of daily living only with the aid of therapy. In order to qualify for this extension. the therapy must be (i) essential to sustain a vital function of the individual. (ii) required to be administered at least three times weekly and for a period averaging at least 14 hours, and (iii) other than the kind that would be beneficial to people who are not so impaired. The Budget proposes toincrease tax relief to relatives of a child with a disability under the age of 18 by providing a supplement of $2,941. to be added to the existing credit that may be claimed in respect of the child. The amount of this supplement is to be reduced by the amount by which the total of the child care and attendant care expenses claimed for the year in respect of the child exceeds $2,000. While the basic disability credit is not refundable to the taxpayer. the unused portion of the individual’s disability tax credit may be transferred, under certain circumstances. to the individual’s spouse or to a supporting indi vidual. The Budget proposes to broaden the spectrum of relatives to whom the unused portion may be transferred to include the brother. sister. aunt. uncle. nephew or niece of the individual or of the individual’s spouse.

Medical Expense Tax Credit

The Budget proposes to broaden the categories of medical expenses that are eligible for the medical expense tax credit, effective for the year 2000 and subsequent taxation
years. Under the proposed changes, certain individuals who support a related person who lacks normal physical development or has a severe and prolonged mobility impairment may claim the medical expense tax credit for the portion of reasonable expenses related to the additional costs incurred in the construction of their principal place of residence to enable the person with a disability to have access to, or to function within the home. This tax credit directly reduces the amount of tax payable by the supporting person by 17% of the construction expense in excess of the lesser of 3% of the income of the individual claiming the expense and $1,637.

Attendant Care Expenses

For taxation years after 1997. a person with a disability could deduct the full cost of attendant care expenses incurred to allow the person to work, up to a maximum of two-thirds of his or her income. (In 1998. a $5,000 “cap” on the deduction was removed.) The Budget proposes to extend the deduction to individuals who incur the expenses in order to attend a designated educational institution or a secondary school. Where an individual attends school, the amount deductible will be capped at two-thirds of the individual’s earned income for the year plus two-thirds of the lesser of (a) the amount by which the individual’s income otherwise determined for the year exceeds hislher earned income (up to a maximum of $15,000), and (b) $375 multiplied by the number of weeks the individual attended the institution or school.

Child Care Expense Deduction

The Child Care Expense Deduction (”CCED”) was introduced in 1971 and was originally intended for oneparent families only. The Sub-Committee on Tax Equity for Canadian Families with Dependent Children recommended that the government review the CCED to ensure it effectively met its policy objectives. Instead of any fundamental change to the deduction, the Budget proposes an increase to the amount deductible in limited circumstances – the maximum annual deductible amount is increased to $10.000 from $7,000 for the year 2000 and subsequent years in respect of a child for whom a disability tax credit may be claimed. The Budget proposals are welcomed and will assist in defraying the costs of medical and artendent care for both children and adults.

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