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Anxiety, Depression and Phobias may be eligible for Disability Tax Credit

The Tax Court of Canada recently considered whether a taxpayer’s anxiety disorder qualified for the Disability Tax Credit (DTC).

The taxpayer was a woman who had been diagnosed by a psychiatrist as suffering from severe social anxiety disorder. Her suffering from anxiety and depression started in high school. She graduated from high school, but once she enrolled in University, she was soon asked to withdraw due to her poor marks.

She had lived in her apartment for about five years. She was able to prepare her own meals, dress and bathe herself, and was able to shop at the local grocery store. She was not able to shop at other retail stores unless she was accompanied by her mother or a close friend. Her mother looked after her banking, making medical appointments and taking care of all third-party communications.

She worked at different jobs as a clerk but she described the experience as absolutely terrifying. Not surprisingly she would not last long in these positions. Her last job was to work for her mother and stepfather’s auto repair shop doing office work. This did not last, because she was unable to interact with customers.

She applied for the Disability Tax Credit for the 2010 to 2017 taxation years. Her claim was disallowed on the basis that she did not meet the eligibility requirements. The taxpayer then appealed to the Tax Court.

The taxpayer is eligible for the DTC, if the impairment represents a marked restriction in the ability to perform a basic activity of daily living. In particular, the impairment results in the individuals being unable to perform the mental functions that will enable them to function independently and with reasonable competence.

This is examined in the context of:

  1. Memory
  2. Adaptive functioning and
  3. Problem-solving, goalsetting and judgement (all taken together).

The court concluded that the she did not have any trouble with her memory. But she did have a marked restriction with respect to adaptive functioning and the third element of problem-solving, goalsetting and judgement. The court concluded that she had a marked restriction in respect of adaptive functioning. Adaptive functioning is an individual’s ability relating to self-care, health and safety, social skills and, common simple transaction. The taxpayer lacked adaptive functioning, as she could not work except for a limited time in the family business, avoided social interactions with all family but her closest family and remained in her apartment. She was heavily reliant on her mother for almost all external daily life functions.

In respect of the third element, problem-solving, goalsetting and judgement, the court noted that her anxiety resulted in what might be considered poor judgement. It resulted in avoidance, procrastination, and withdrawal which in turn led to failing grades, loss of employment and reluctance to pursue therapy.

The court concluded that there was a marked restriction in her ability to perform the basic activity of daily living. And hence the court determined that the taxpayer was eligible for the DTC.

To determine if a person is eligible for the DTC due to a mental condition, the Tax Form T2201 needs to be completed by a medical doctor or psychologist.

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