Disability Supports and Other Special Deductions

Disability supports deduction :

The disability supports deduction is available for individuals with disability who incur specific expenses to enable them to work, attend school, or conduct research. The Disability Support Deduction (DSD) is a tax deduction that allows an individual to claim the costs of support services required due to a physical or mental impairment. This deduction is available on both federal and Quebec returns and is intended to offset the additional expenses incurred to allow the individual to work, attend school, or conduct research.

Eligible costs :

The list of eligible expenses is detailed and includes costs for attendant care, special devices, and services. Examples include:

• Attendant care services, including a full-time attendant.
• Interpreting and note-taking services for hearing or speech impairment.
• Special devices or software for people with vision impairments.
• Certain items for mobility, including an elevator or lift.

Form T929 for federal tax return and form TP-358.0.1-V, Disability Supports Deduction is used to report expenses. Final deduction amount is reported on line 21500 of the federal T1 return and on line 250 of the TP1 return.

Example :

Dorothy is recognized as a person with a disability by both the CRA and Revenu Québec. She has a working income of $30,000 and recently installed a lift in her home, costing $8,000, to enhance accessibility and support her mobility needs.

Answer: Dorothy can deduct $8,000 on line 21500 and on line 250 of T1 and TP1 tax returns.

Deduction for the purchase of an income-averaging annuity for artists :

Only in Quebec can an artist claim a deduction for purchasing an income-averaging annuity. This deduction is used when an artist's income fluctuates significantly from year to year, allowing them to defer income from a high-earning year to a maximum of seven subsequent years. This helps smooth out income and reduce tax payable by potentially moving income to years with lower tax brackets.

A recognized artist under Quebec's Act respecting the professional status of artists in visual arts, film, recording arts, literature, or performing arts can purchase an income-averaging annuity using income from artistic activities. The annuity must be purchased with a single lump-sum payment and pays out in equal periodic payments over a maximum of seven years. When the annuity pays out, the income is reported on an RL-2 slip.

To claim the deduction, the annuity must be purchased from an authorized provider, and the deduction is limited to the maximum amount specified in the work chart for line 250 of the Quebec tax return. The deduction is reported on line 250, "Other deductions," and when the annuity pays out, the income must be reported, with any special tax often offset by a refundable tax credit.

Example:

Marc, a recognized graphic artist and Quebec resident, earned $120,000 from his artistic activities in 2024, a high-income year, and anticipates a lower income of $40,000 in 2025. To average his income, he purchased a seven-year income-averaging annuity with a single payment of $49,000 in December 2024.

Answer: For his 2024 Quebec tax return, Marc deducts the $49,000 on line 250 (Other deductions), to ensure it is within the legal limit, reducing his taxable income from $120,000 to $71,000 and lowering his tax burden for that year. From 2025 to 2031, the annuity pays $7,000 per year, which Marc must include on line 122 (Annuities) of his Quebec return based on the RL-2 slip. He also claims a tax credit on line 462 (Tax credit for income from an annuity for artists) to offset the tax liability on the annuity income, calculated using the tax deducted at source by the annuity provider, as reported in box C-9 of the RL-2 slip.

Deduction for an amount already included in income (FHSA) :

This deduction applies when an amount from a First Home Savings Account (FHSA) was included in income but qualifies for an offsetting deduction, such as when property within the FHSA was used as security for a loan. If property in the FHSA was pledged, its fair market value (FMV) must be included as income, reported on line 12906 of the federal T1 return and line 129 of the Quebec return. Once the property is no longer used as security, a deduction can be claimed for the amount previously included in income—on line 23200, "Other deductions," for the federal return, and on line 250, "Other deductions," in Quebec, using the amount shown in box E of the RL-32 slip.