TurboTax: ON428, Foreign Tax Credits & T2201


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Relevant Material : "The Foreign Tax Credit and Form T2201 are distinct Canadian tax provisions with the common goal of providing tax relief through credits, but they apply in completely different situations.

Significance of the Foreign Tax Credit (FTC)
The primary significance of the Foreign Tax Credit is to provide relief from double taxation on income that is earned outside of Canada. As a resident of Canada, you are required to report income from all sources, both domestic and foreign, on your Canadian tax return. 
  • Purpose: If you pay income or profits tax to a foreign government on that income, the FTC allows you to reduce your Canadian tax owed by the amount of foreign tax paid. This prevents you from paying full tax to both Canada and another country on the same income.
  • Mechanism: The credit is a direct, dollar-for-dollar reduction of your Canadian tax otherwise payable, up to the amount of Canadian tax due on that foreign income.
  • Application: To claim the federal FTC, individuals generally use Form T2209, Federal Foreign Tax Credits - Individuals when filing their income tax return. 
Significance of Form T2201, Disability Tax Credit Certificate
Form T2201, Disability Tax Credit Certificate, is significant because it is the application form required to determine eligibility for the Disability Tax Credit (DTC). 
  • Purpose: The DTC is a non-refundable tax credit that helps individuals with a severe and prolonged impairment, or a supporting family member, reduce their amount of income tax payable. The credit aims to offset some of the extra costs related to the impairment.
  • Mechanism: Being approved for the DTC can open doors to other federal programs and benefits, such as the Registered Disability Savings Plan (RDSP) or the Child Disability Benefit.
  • Application Process:
    • Part A of the form is completed by the applicant or their legal representative.
    • Part B must be certified by a qualified medical practitioner (e.g., doctor, nurse practitioner).
    • The completed form is submitted to the Canada Revenue Agency (CRA) for a decision.
  • Outcome: If the application is approved, the individual can claim the disability amount on their tax return. Eligibility can also be backdated for up to 10 previous years, potentially resulting in large refunds from amending past returns. The form itself is a certificate of eligibility, not the credit itself. 
In summary, the Foreign Tax Credit addresses international tax issues, while Form T2201 addresses a Canadian domestic tax credit for persons with disabilities. .. " (Google) 
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