The
incapacity tax credit score
(DTC) is a non-refundable tax credit score that’s meant to acknowledge the influence of assorted non-itemizable disability-related prices. For 2025 the worth of the federal credit score is $1,521 however add the provincial tax financial savings and the mixed annual worth may be as much as $3,243, relying on the worth of the provincial credit score. Not each incapacity qualifies and there are particular standards relying on the kind of incapacity. The DTC can be a requirement to qualify for opening a
registered incapacity financial savings plan
(RDSP).
In a latest case determined earlier this month, a taxpayer who was affected by extreme obstructive sleep apnea tried to say the DTC for the 2014 to 2023 taxation years. To this finish, he accomplished the Canada Income Company’s required
, Incapacity Tax Credit score Certificates. The CRA subsequently reviewed the shape and issued a discover of willpower informing the taxpayer that he was not eligible. The taxpayer objected and in the end appealed the CRA’s resolution to the Tax Courtroom.
The taxpayer is a small enterprise proprietor. Greater than a decade in the past his partner observed that she was not sleeping properly as a result of she could be woke up every night time by her husband’s respiration. The taxpayer described waking up at night time, lurching, gasping and sweating. He was additionally falling asleep through the day, together with whereas in conferences at work or throughout dinner. The taxpayer finally sought medical consideration from his physician.
His physician suspected that he had sleep apnea and organized for a sleep research with a respiratory companies agency involving an in a single day oximetry take a look at. Based mostly on the outcomes of the take a look at the physician recognized the taxpayer with obstructive sleep apnea and prescribed using a steady optimistic airway stress (CPAP) system, a heated humidifier and a nasal masks, to be worn on a nightly foundation, indefinitely.
The taxpayer bought a CPAP machine and began to make use of it at night time. In time, the taxpayer observed a big enchancment in his wellbeing and well being. His skill to perform returned with CPAP remedy and he was not waking up lurching and gasping and soaking in sweat.
The taxpayer sought to qualify for the DTC on the premise that his use of a CPAP system meets the eligibility standards for what’s known as “life-sustaining remedy.” Beneath the tax legislation, 5 circumstances should be happy to be eligible for the DTC for life-sustaining remedy. First, the person will need to have a number of extreme and extended impairments in bodily or psychological features. Second, the person is receiving remedy that’s important to maintain an important perform of the person. Third, the remedy is required to be administered not less than two instances every week for a complete period averaging not lower than 14 hours per week. Fourth, the remedy can not moderately be anticipated to be of great profit to individuals who should not have a extreme and extended impairment in bodily or psychological features. And fifth, the results of the impairment is such that with out the life-sustaining remedy the person’s skill to carry out a fundamental exercise of every day residing could be markedly restricted.
The CRA accepted that, on this case, the taxpayer met circumstances 1, 2, 4, and 5 however it was situation 3 that was problematic. That situation requires the remedy to be administered not less than two instances every week for a complete period averaging not lower than 14 hours weekly. Moreover, the Tax Act specifies that the time spent on administering remedy consists of solely time spent on actions that require the person to take time away from “regular on a regular basis actions” in an effort to obtain the remedy.
The taxpayer testified that, though he was in a position to go to sleep with using the CPAP system, it was not so simple as placing the masks on and sleeping for eight hours. He described having to spend so much of time making an attempt to get to sleep with the CPAP masks. As well as, the masks would vent and the humidity would go away his face moist. When he rolled over through the night time, the taxpayer stated water would generally run throughout his face and wake him up, generally a number of instances an evening. He would wish to rise up to clean his face after which return to mattress, place the masks on and take time to fall again asleep.
The taxpayer accepted that sleep itself is a standard on a regular basis exercise and so the time he spent sleeping whereas utilizing the CPAP machine shouldn’t be included within the 14 hours. However he testified that the time he spent every night time establishing the CPAP system, the time he spent making an attempt to go to sleep utilizing the CPAP system, the time spent being woke up by the CPAP system and the time spent making an attempt to get again to sleep after his sleep was disrupted totaled greater than 14 hours every week and needs to be thought of “time away from regular on a regular basis actions.”
Whereas the choose was sympathetic to the influence that extreme sleep apnea has on the taxpayer and acknowledged the challenges that sleeping with a CPAP masks created for the taxpayer, he concluded that using the CPAP system whereas falling asleep and whereas making an attempt to fall again asleep following a sleep disruption didn’t require the taxpayer to take time away from regular on a regular basis actions in an effort to obtain the CPAP remedy.
Because of this, the choose concluded that the taxpayer didn’t obtain remedy that was required to be administered for a complete period averaging not lower than 14 hours per week as required by the tax legislation, and subsequently situation 3 for eligibility was not happy. The taxpayer was subsequently discovered to be ineligible for the DTC for the taxation years in query.
Jamie Golombek,
FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto.
Jamie.Golombek@cibc.com
.
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