Disability Tax Credit: Spring update changes not nearly enough
‘There’s more to be done,’ says Canadian Tax Observatory CEO Heather Scoffield on the Disability Tax Credit. / CANADIAN TAX OBSERVATORY PHOTO
The majority of Canadians who could qualify for federal disability support can’t access them and many are living in poverty, according to a new report by the Canadian Tax Observatory.
“Persons with disabilities are among the most economically marginalized groups in Canada, and the gap between their incomes and those of non-disabled Canadians has persisted for at least a decade,” the report, Broken Links: Poverty and the limits of the Disability Tax Credit, says.
Improving access to the Disability Tax Credit (DTC) is necessary but not enough to significantly reduce low income among Canadians with disabilities. This is because the Canada Disability Benefit Act, launched in 2023 “to reduce poverty and to support the financial security of persons with disabilities,” was designed to use the DTC certificate as the sole basis for eligibility.
“That design choice places the DTC — a non-refundable tax credit created for tax equity purposes, not income support — at the centre of Canada's disability poverty reduction architecture,” the report says. Most eligible individuals do not hold a DTC certificate, with gaps disproportionately affecting women, people with mental health or episodic disabilities, and those in the lowest income bracket, the report says.
Current eligibility criteria exclude certain disability types and create barriers particularly for those with episodic, mental health, and pain-related conditions, requiring legislative reform, the observatory says. The report also points to a burdensome and costly certification process that disadvantages low-income applicants and lacks transparency in denials, issues that could be addressed through administrative changes.
“Eighty-four per cent of people with disabilities do not have DTC certification — and can’t access the other disability programs it is intended to unlock. This means the majority of people who could benefit for federal disability supports are excluded before they can access them,” the report says.
In the Spring Economic Update, released on April 29, the government announced it would provide $42.5 million to the Canada Revenue Agency to administer changes to the Disability Tax Credit in order to make it easier to apply.
“Each year, more Canadians are accessing the Disability Tax Credit, yet barriers in navigating the application process remain for many. The government is committed to supporting persons with disabilities and their families to access all the supports they need,” the government says in the economic update.
Medical practitioners must certify both the existence of an impairment and its impact on daily activities to ensure fair application of the Disability Tax Credit, though this requirement increases administrative workload. The economic update proposes streamlining applications for individuals with certain long-term diagnosed conditions and expanding the range of professionals who can certify eligibility, while maintaining existing eligibility criteria. It also proposes allowing public guardians and trustees to certify eligibility for adults in their care with proven mental incapacity, with changes rolling out starting in the 2026 and 2027 tax years.
“These changes are expected to provide $345 million over six years, and $86 million per year ongoing, in tax relief under the Disability Tax Credit and via increased payments of federal benefits (such as the Canada Disability Benefit and the Child Disability Benefit), starting in 2025-26,” the government says, adding that $42.5 million over five years will be given to the Canada Revenue Agency to administer the changes.
Canadian Tax Observatory CEO Heather Scoffield said there’s more to be done. “The measures in the spring update are recognition that there is work to do in turning the DTC into an effective gateway to much-needed income supports for people with disabilities. There’s more to be done, and the measures open the door to further collaboration,” she told Means & Ways.
It’s time to act, the Canadian Tax Observatory says. “The DTC is failing as a gateway to benefits meant to alleviate poverty, but it can be repaired. Let’s fix it.”
