DTC eligibility for taxpayers with Type 1 diabetes

The CRA has been finding people living with Type 1 diabetes ineligible for the Disability Tax Credit (DTC), on the basis that one of the requirements is you need 14 hours of life-sustaining therapy per week, on average, to qualify.

An internal CRA clarification letter from May said adult diabetics don’t require that much time, explaining that 14 hours per week to manage insulin therapy is only required in “exceptional circumstances.”

The agency faced criticism from diabetes support groups, disability advocates and opposition parties for denying the DTC claims of people with Type 1 diabetes who had previously qualified. Though it says it never changed the eligibility criteria, CRA announced earlier this month that it would revert to the pre-May clarification letter.

Read: CRA reverts to previous DTC criteria for diabetics

The agency stated it would review all applications that had been refused since May 2017. Applicants are not required to present new or additional information, unless the CRA requests that they do so.

In reality, the number of therapy hours for people living with Type 1 diabetes varies based on the person’s condition. Even with CRA returning to its original clarification, it’s likely that very few cases will satisfy the criteria of 14 hours. To address this, Finance Canada would need to change the legislation.

Read: All about the disability tax credit

For now, it’s important to understand what qualifies as essential therapy for people with Type 1 diabetes under the act.

Therapy rules

First, to be eligible for the DTC, a taxpayer’s impairment must be severe and prolonged (i.e., it must last longer than 12 months.) Second, the therapy must be required to sustain the person’s vital functions, meaning the type of therapy they require would not significantly benefit people who are not similarly impaired.

That therapy must be administered at least three times each week for an average of at least 14 hours per week. What is counted in the 14 hours is the time spent administering this therapeutic care, calculated based on the following criteria:

• the time spent on activities requiring the individual to take time away from normal everyday activities to receive the therapy; and
• the time spent to determine the regular dose of medication.

Calculating the required hours of therapy is a challenge.

When it comes to DTC eligibility, the time that a diabetic person spends adjusting a portable blood glucose meter can be considered part of their therapy, because doing so interrupts everyday activities. The time to determine the regular dose of medication may also count, as could the time spent on activities related to insulin therapy such as monitoring blood-sugar levels, preparing and administering insulin, and calibrating equipment.

If a diabetic child cannot do therapy-related activities because of his age, the time that his parent spends on these activities can be counted in the required 14 hours per week. It can include the time spent waking the child during the night to check his blood-sugar level.

Case examples

In the Hutchings case from 2009 (Hutchings, 2009 6 C.T.C. 2171), a taxpayer was refused the DTC on the grounds that his diabetic daughter only spent seven hours per week administering insulin to herself and adjusting the dose. Thus, the 14-hour requirement was not met.

However, diabetic people must pay particular attention to their nutrition and level of physical activity. It is essential for people with diabetes to count carbohydrates in their daily meal preparation, for example: eating too many or too few carbs can lead to complications with the daily dose of medication.

According to current legislation, the time spent on activities related to a special diet, dietary restrictions or an exercise program is not taken into account, even though it is used in determining the daily dose of medication.

But, a recent case may lead to a change in this interpretation. In the Mullings judgment from 2017 (Mullings, 2017 C.T.C. 133), the judge deemed that the time spent counting and controlling the consumption of certain foods because of an illness should be considered as part of the average of 14 hours per week. The judge said that time qualified as essential therapy, not as a dietary regime.

Read: CRA reverts to previous DTC criteria for diabetics

As mentioned in a previous column, the DTC is a cornerstone of the Income Tax Act. In addition to the credit amount that eligible taxpayers receive, it allows such individuals to access tax measures for disabled persons such as the Registered Disability Savings Plan.

Read: Which tax tools require DTC-eligibility?

David Truong, Pl.fin, CFP, CIWM, M.Fisc, works as a senior consultant, expertise centre, at National Bank Private Banking 1859. He also teaches at McGill University.

David Truong

Tax & Estate

David Truong, Pl.fin, CFP, CIWM, M.Fisc, works as a senior consultant, expertise centre, at National Bank Private Banking 1859. He also teaches at McGill University.