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Disability Tax Credit benefits Canadians with diabetes

Parents of children with diabetes to benefit: Canadian Diabetes Association


April 11, 2005

Disability Tax Credit and People with Diabetes
Frequently Asked Questions



Some Canadians who use insulin to manage their diabetes may be eligible for a federal tax credit worth up to $1,055 when they file their 2005 tax returns next year, the Canadian Diabetes Association announced today.

Since May 2004, Canadians using an insulin pump have been eligible for a tax credit. Announced as part of the recent federal budget, the criteria for the Disability Tax Credit will be expanded for 2005 to include Canadians with diabetes who inject their insulin, in addition to those who use an insulin pump.(1)

The Association expects these amendments to allow those Canadians living with diabetes, particularly children, who spend at least 14 hours per week testing their blood glucose levels and taking multiple daily insulin injections or programming an insulin pump to be eligible for the disability tax credit. Children are most likely to qualify since the time spent by their parents administering the child's insulin and testing blood glucose levels will be counted towards the 14-hour requirement.(2)

"People with diabetes can face annual medical costs ranging up to $5,000 a year to manage their disease, so this federal assistance to ease some of the financial burden of diabetes is a most welcome first step," said Karen Philp, Director, Public Policy and Government Relations, Canadian Diabetes Association.

In May 2004 the Canada Revenue Agency (CRA) confirmed to the Association that under current legislation, Canadians whose type 1 diabetes cannot be controlled with multiple daily injections of insulin, and for whom insulin pumps are a medical necessity, were eligible for the disability tax credit.

However, as the CRA only considered the time actually spent administering the insulin to be included in the 14-hour requirement for 'life-sustaining therapy,' individuals who used a syringe to deliver their insulin (and not a pump) did not generally qualify.(3)

The Canadian Diabetes Association argued strongly that it is the insulin that is the life-sustaining therapy, and encouraged the inclusion of medically-necessary activities such as blood glucose testing and injection preparation as part of the 14-hour requirement.

"People who are insulin-dependent are just that - they require insulin to live," said Philp. "For Canadians with diabetes, this disease requires monitoring and adjustments of insulin requirements on a 24-hour basis, whether they use an insulin pump or a syringe. We welcome this extension of eligibility criteria to include insulin injection by syringe as well as by pump."

The Canadian Diabetes Association has offered to work with the CRA to develop guidelines to assist individuals with diabetes and their doctors to determine whether they would be eligible for the disability tax credit under the proposed changes. The Canadian Diabetes Association also will continue to encourage greater federal and provincial government assistance to help ease the financial burden of Canadians living with type 1 or type 2 diabetes.

Tax relief for Canadians with diabetes

Canadians with diabetes who are eligible for the 2005 disability tax credit could see a federal tax credit of up to $1,055, as well as tax relief at the provincial level.(4) Parents of children who are eligible for the disability tax credit may also claim the disability tax credit supplement for children, which provides additional tax relief of up to $616. They may also receive assistance from the Child Disability Benefit, which is paid as a supplement of the Canada Child Tax Benefit to low- and modest-income families caring for a child with a disability. The recent federal budget increased the maximum Child Disability Benefit to $2,000 beginning in July 2005.

Canadians with type 1 or type 2 diabetes may also be eligible for tax relief for their above-average medical costs by claiming the federal government's medical expense tax credit. This credit recognizes the cost of insulin, needles or syringes, insulin pumps, and blood glucose testing devices.

People with type 1 diabetes produce little or no insulin and require daily insulin injections to stay alive. It is estimated that up to 40% of people with type 2 diabetes (usually managed with lifestyle modifications and medication) may eventually need to move to daily insulin injections.

The Canadian Diabetes Association works to prevent diabetes and improve the quality of life for those affected, through research, education, service and advocacy. With a presence in more than 150 communities, the Canadian
Diabetes Association's strong network of assistance includes volunteers, employees, healthcare professionals and partners. The Canadian Diabetes Association - Know who to turn to.


(1) The changes were part of the government's response to the report of the Technical Advisory Committee on Tax Measures for Persons with Disabilities (a copy of the Committee's report can be obtained by visiting the Committee's website at www.disabilitytax.ca).

(2) More details on the budget measure can be found at www.fin.gc.ca/budget05/bp/bpa8ae.htm No. Income Tax.

(3) More information about federal disability related tax measures are available at http://www.disabilitytax.ca/distax-e.html

(4) All applicants will require a form T2201, Disability Tax Credit Certificate, completed by their physicians stating that the individual spends at least 14 hours per week on administering insulin and testing blood glucose levels.

 


Disability Tax Credit and People with Diabetes
Frequently Asked Questions

 


What are the disability Tax Credit eligibility criteria for people with diabetes in the 2004 tax year (this year)?

In May 2004, the Canada Revenue Agency (CRA) confirmed that insulin pump
users, both adults and children, whose diabetes could not be controlled with
multiple daily injections of insulin, and for whom insulin pumps were a
medical necessity, were considered eligible for the Disability Tax Credit
(DTC) under the existing life sustaining therapy criteria. This internal
administrative policy decision was made retroactive to 2000.
Prior to extending eligibility to insulin pump users, only Canadians with
diabetes who required kidney dialysis or were markedly restricted in a basic
activity of daily living were eligible for the disability tax credit.
The CRA also makes a distinction between medical necessity and lifestyle
choice. Individuals requiring an insulin pump out of medical necessity - as
determined by their physician - are eligible for the DTC. Those who choose an
insulin pump for personal preference are not eligible.


What are the proposed changes to the Disability Tax Credit for the 2005 tax year (next year)?

Following the amendments to the disability tax credit announced in the
2005 budget, the Canadian Diabetes Association has been in discussions with
the federal government regarding the criteria for the "life sustaining
therapy" provisions.

The Association expects that these amendments would allow Canadians,
particularly children, living with diabetes who spend on average at least
14 hours per week testing their blood glucose levels and taking multiple daily
insulin injections or programming an insulin pump to become eligible for the
disability tax credit.

If the 14 hours per week of time dedicated to "life sustaining therapy"
criteria is met and is certified by a doctor, Canadians using insulin should
be eligible to receive the disability tax credit when they file next year's
2005 tax return.


How much is the Disability Tax credit worth?

Canadians with diabetes who are eligible for the disability tax credit
could see a federal tax credit of up to $1,055 (for 2005) as well as tax
relief at the provincial level. Parents of children who are eligible for the
disability tax credit may also claim the disability tax credit supplement for
children, which provides additional tax relief of up to $616 (for 2005). They
may also receive assistance from the Child Disability Benefit, which is paid
as a supplement of the Canada Child Tax Benefit to low- and modest-income
families caring for a child with a disability. The recent federal budget
increased the maximum Child Disability Benefit to $2,000 beginning in
July 2005.


Who is eligible for the Disability Tax Credit?

For the 2004 tax year, Canadians whose diabetes cannot be controlled with
multiple daily injections of insulin, and for whom insulin pumps are a medical
necessity, would be eligible for the disability tax credit.

For the 2005 tax year, it is expected that Canadians with diabetes,
particularly children, who use an insulin pump or take insulin by injection,
and who spend on average at least 14 hours per week testing their blood
glucose levels, programming an insulin pump, or injecting insulin will likely
become eligible for the 2005 disability tax credit.

All applicants will require a form T2201, Disability Tax Credit
Certificate, completed by their physicians stating that the individual spends
at least 14 hours per week on administering insulin and testing blood glucose
levels.




Why is there a 14-hour per week time commitment criteria and how was it arrived at?

The purpose of the life sustaining therapy provisions is to provide tax
relief under the disability tax credit to those individuals whose therapy
requires them to dedicate a significant amount of time away from their normal,
everyday activities to receive the therapy. Accordingly, the life-sustaining
therapy must be administered at least 3 times each week for a minimum of
14 hours per week - the equivalent of 2 hours every day. The Canadian Diabetes
Association acknowledges that the Disability Tax Credit is very much a blunt
instrument for achieving greater equity for Canadians. It grants a flat
credit, regardless of the actual costs associated with the disability or
impairment.


What is considered life-sustaining therapy?

In response to recommendations in the final report of the Technical
Advisory Committee on Tax Measures for Persons with Disabilities, the
following amendments to the Income Tax Act are proposed to better define the
activities that will be considered as life sustaining therapy, and will be
included as time spent receiving therapy (a copy of the Committee's report can
be obtained by visiting the Committee's website at www.disabilitytax.ca).

Specifically:
  • Where the therapy has been determined to require a regular dosage of
    medication that needs to be adjusted on a daily basis, the activities
    directly involved in determining the appropriate dosage will be
    considered part of the therapy.

  • Therapy does not include activities such as following a dietary
    restriction or regime, exercise, travel time, medical appointments,
    shopping for medication or recuperation after therapy.

  • The time it takes to administer the therapy must be time dedicated to
    the therapy - that is, the individual has to take time away from
    normal, everyday activities in order to receive the therapy. Further,
    in the case of a child who is unable to perform the activities related
    to the therapy as a result of his or her age, the time spent by the
    child's primary caregivers (i.e. parents) performing and supervising
    these activities for the child can be considered as time dedicated to
    the therapy.
For the 2005 tax year, it is expected that children with very severe
cases of type 1 diabetes - who require many insulin injections (which requires
knowledge of current blood sugar levels at the time of each injection), as
well as several additional blood sugar tests to monitor their condition - will
become eligible for the disability tax credit.

The life-sustaining therapy provisions, in and of themselves, do not
extend eligibility for the disability tax credit to individuals who receive
therapy in a manner that does not significantly affect their everyday
activities (for example, by means of a portable or implanted device).
(Source: Annex 8 of the 2005 Federal Budget).


I have diabetes but do not use insulin. Managing my diabetes is very costly to me personally. Am I eligible for the Disability Tax Credit?

No. For the purposes of the disability tax credit, people with diabetes
must be using insulin in order to qualify for the credit under the
life-sustaining therapy provisions. Canadians with type 1 or type 2 diabetes
may also be eligible for tax relief for their above-average medical costs by
claiming the federal government's medical expense tax credit. This credit
recognizes the cost of insulin, needles or syringes, insulin pumps, and blood
glucose testing devices. More details on the budget measure and the medical
expense tax credit can be found at www.fin.gc.ca/budget05/bp/bpa8ae.htm No.
Income Tax
.


What is an insulin pump?

Worn like a pager, an insulin pump is a microcomputer that delivers
continuous amounts of insulin through a flexible catheter inserted under the
skin of the abdomen.

What role did the Canadian Diabetes Association play in the proposed
changes to the Disability Tax Credit?

In 2004, the CRA extended eligibility to include insulin pump users who
meet the 14-hours per week time criterion for being considered a
'life-sustaining therapy'. In response to this information, the national
advocacy office of the Canadian Diabetes Association wrote the Commissioner of
the CRA and the Co-Chairs of the Technical Advisory Committee on Tax Measures
for Persons with Disabilities identifying the shortfalls with the policy.

The Canadian Diabetes Association argued strongly that it was the
insulin, not the technology that delivers it, which constitutes the
'life-sustaining therapy.' The Association held that that all people who take
multiple injections of insulin should be eligible for the tax credit, provided
they can demonstrate the 14-hours per week medical time commitment, not just
those who can afford an insulin pump.

As a result of the recent budget announcements, the CRA is now reviewing
its materials in anticipation of the proposed changes to broaden the tax
credit to all eligible insulin users, not just insulin pump users, in time for
the 2005 tax filing season. The Association has offered to work with the CRA
to develop guidelines to assist individuals with diabetes and their doctors to
determine whether they would be eligible for the disability tax credit under
the proposed changes.


 





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