Looking after your elderly parents? There’s a tax credit for that.
One of the biggest problems for many of your clients who may be in this situation is that they are often not aware that several significant tax credits are available to them for the work they do for an elderly person.
Daniel Collison, regional director with Winnipeg-based Investors Group Inc. in Markham, Ont., isn’t surprised. He says adult children aren’t used to getting a break from the taxman for real-life situations. “People typically don’t relate tax credits to a natural occurrence,” he says. “If you’re taking care of Mom, all you’re thinking about is the caregiving.”
He notes that a trigger for many grown children is when they start paying for a variety of medical expenses for their parents.
A basic credit available in cases in which the parent is living with the taxpayer is the eligible dependent (equivalent to spouse) credit. Caregivers who are single, divorced, separated or widowed and support a relative (by blood, marriage or adoption) who was a Canadian resident and living with them for part of the tax year may claim all or part of $10,382 on their federal tax return.
For another credit, the infirm dependent tax credit, the Canada Revenue Agency is very specific about the person receiving care. That person must be your parent, grandparent or relative over the age of 18 who is mentally or physically infirm. This credit is available to all — including married couples — who take care of mentally or physically infirm dependent relatives. The dependent doesn’t have to be living with the caregiver but must be a Canadian resident. Caregivers can claim up to $4,223, although the credit is reduced by the portion of the dependent’s net income for the year above $5,992.
The caregiver tax credit is for people who provide care in their home for a parent, grandparent or dependent adult relative who is mentally or physically infirm. This credit, also a maximum of $4,223, cannot be claimed if the infirm dependent credit is claimed; it can, however, be divvied up among the caregivers if the dependent lived in both households at different times. “If I’m looking after my widowed mother and so is my brother, we could split the tax credit. We’d have to come to an agreement, as long as it’s 100%,” Collison says.
The disability tax credit is also available.
In addition, caregivers who are covering allowable medical expenses for dependent parents can claim a portion of those costs. The total of these expenses must exceed the lesser of $2,024 or 3% of the dependent’s net income for the year. The maximum amount that can be claimed is $10,000. If more than one child supports the parent, each can claim up to $10,000, provided the amount claimed doesn’t exceed the medical expenses paid by the child.
In the case of the elderly, in particular, the range of eligible medical expenses is extensive. Some include bathroom aids, power-operated guided chairs for stairways, scooters and renovations to make a home wheelchair-accessible.
Help from others also may be claimed. Attendant care by an unrelated person may include food preparation, housekeeping, social activities and transportation. Fees for nursing-home care can be claimed in their entirety.
As well, caregivers who take time off work to attend to a dependent parent may be entitled to up to 26 weeks of compassionate care benefits under the employment insurance system.
Advisors should educate clients on the many nuances of the tax credits and other benefits available, says Jennifer Douglas, tax manager for Toronto-based PricewaterhouseCoopers LLP in Windsor, Ont.: “Things are introduced and changed every year. People often don’t think ahead of time that they have to plan for these things and [for instance] make themselves eligible for the disability credit by filling out the appropriate paperwork.” IE