I need clarification regarding transfer of the disability amount. The program correctly claims the amount in the supporting person’s T1 on line 31800, but also shows it in the return of the dependent on line 31600. Is this correct? I thought CRA may question this if the amount is claimed on both returns… Please advise.
Yes. This is correct. Although it appears strange that the credit is listed on the tax return of the person with DTC credit, only the unused portion is transferred to the supporting person. CRA recognizes this on their end and approves it with no issues. I’ve used several different tax software and I believe they all code it this way.
A couple of years ago, I had a case where CRA wanted authorization from the disabled person allowing her mother to claim the DTC transfer. The claim had been made for years without a glitch. And, CRA wanted details of how the mother supported her daughter. They do not have the same address. So, I had a letter drafted authorizing the transfer and detailing the support provided, and had both sign the letter. No problems subsequently. By the way, has anyone noticed that the mental function portion of the form is now greatly expanded? And type 1 diabetics will automatically get the credit upon applying? I may be cynical, but I’ll bet there’s a high-placed politician somewhere who is bipolar and a type 1 diabetic who wants the extra $1,800 per year. Remember a few years ago when diabetics were routinely denied renewal of the credit? And people with a mental disability were treated the same? Saw one individual who could function 90% of the time with appropriate medication, so CRA denied renewal of the DTC. Never mind the fact that in 10% of the time the individual got in trouble, was picked up by the police, and taken to the mental health ward of the local hospital.
The diabetes associations in Canada have been fighting CRA for a long time. CRA used to require Type 1 diabetics to pretty much prove that they spent at least 14 hours a week monitoring their blood sugar levels. Many T1 diabetics didn’t get the DTC. This is a great change for people who legitimately spend a lot of money on their disability (way more than the $1600 the credit provides).
Regarding the DTC transfer, I think a lot of it also has to do with the agent reviewing the file. I’ve heard of situations where the transfer from the parent to the caregiving son or daughter was denied, even though they lived together, because the parent paid for all the expenses. In this situation, it didn’t seem to matter that the son / daughter were required to make the meals, do the cleaning, take their parent shopping or to doctors appointments, etc. Yet, I’ve seen other transfers with almost identical scenarios be approved.
There has to be a financial dependency. If the DTC recipient has sufficient income they are not “dependent”
For 2023 the Canada Caregiver Amount for people with DTC [and infirm spouses or dependants] is reduced when the person with the disability’s income is over $ 18,783 and is zero after $26,782. Could one argue that because this formula is in schedule 5, the spouse should be automatically considered financially dependent if their income is below $26,782?
I find the Technical Interpretations inconclusive as to when one is considered financially dependent.
I’m sure one could argue over most things in the ITA. That’s pretty much why tax lawyers exist. The question is WHO are you arguing WITH? CRA? TCC? Department of Finance? Your own MP? Other accountants on this forum?
I am arguing with myself - And would like the tax communities input.
Client is not sure we should claim. My argument is that if the law shows that the credit is gone after a certain amount of income of the PWD that that should be enough to show that if their income is less, that they are dependent on their spouse.
I agree with your logic. But, the concept of “dependent” is not Boolean, it’s a matter of degree, which IS captured in the calculation of the deduction:
100% deduction if the dependant’s income is less than x;
No deduction if the dependant’s income is more than y; and
A gradual reduction of the deductible amount if the dependant’s income is between x and y.