Taxpayer received significant refund due to several years of retroactive Disability Tax Credit reassessments, which includes a large amount of refund interest (Over $5k).
My understanding is that this interest is taxable and reported on Line 12100.
Is there any exemption for interest tied to disability credits or is this standard taxable interest?
No. I’ve only rarely run across people who actually report it though and FWIW, have never seen CRA reassess it on matching, oddly, I’ve got another one this year I’ll be watching…
Seems like a very high amount for refund interest?
It is taxable income, and you shoud be informing your clients as such. There is no exception for refunds resulting from disability credits. Why would there be? It’s an amount of income in addition to the refund resulting from the DTC.
Failing to include that interest as income on a return - when you are aware of it - amounts to filing a tax return that you know is false, which of course no one should be doing. It could even result in the revocation of your efile license in extreme cases.
Disability claims can go back up to 10 years, and therefore be worth tens of thousands of dollars in retroactive refunds in some cases.
Usually not a lot if interest paid years 4 to 10 back.
Just went back and checked an 8-year DTC refund…$1,250 in interest, the vast majority of which is in the three preceeding years of course. $5K in interest also sounds like it includes other things (perhaps previously disallowed medical/care costs?).
Regardless, if it’s refund interest it’s taxable. The thing that resulted in the refund and therefore the interest doesn’t matter.
Of course, nobody was suggesting otherwise I don’t believe…just that the amount seemed unusually high for CRA interest.
The reason the refund interest amount is so high is likely because multiple DTC claims (parent and children) were approved retroactively for several years and the taxpayer had high income in each of those reassessed years.
I will cross‑reference the amount the taxpayer provided with the CRA data available through Represent a Client to confirm accuracy.
But the bottom line no matter the amount of interest is taxabale.
I just had one for $14K on a $50 refund. Large refund going back to 2022.
You have to understand that the last few years the interest was quite high.