Filing for an elderly parent? 6 ways to maximize their return (and yours).
April 1, 2021
Whether you’re taking care of your aging parents or just helping them with their taxes, here are some tips to keep in mind so you can both get the most back when you file your 2020 returns.
1. Make sure they file a return.
If your parent only needs to report a small amount of income for the year (or even none at all), they should still file a return. Every Canadian resident is entitled to claim the basic personal amount, a tax credit which reduces the amount of tax you owe. The maximum basic personal amount you can claim for 2020 is $13,229. Plus, if your parent is 65 or over at the end of the year, they’ll also be eligible for the age amount of $7,637. This means if your parent is reporting less than $20,866 in income, they won’t owe federal taxes this year. They can also claim a corresponding provincial basic personal amount and age amount – the amount they’ll receive for these credits depends on which province or territory they live in.
The government also needs the information from their return to confirm their eligibility for federal benefits like the Guaranteed Income Supplement (GIS) and the GST/HST Credit, as well as provincial benefits like the BC Recovery Benefit. If your parent doesn’t file a return, they’ll miss out on these benefits.
2. Split their pension income.
Seniors are allowed to split up to half of their eligible pension income with their spouse or common-law partner. This can mean a significant tax reduction when one spouse has very little income, and the other has a lot. This can also mean:
- Lowering or stopping your parent’s Old Age Security (OAS) repayments; and/or
- Giving the lower income spouse access to the pension income amount or increasing their credit amount.
Keep in mind, your parent won’t be able to split OAS payments, CPP and/or QPP payments, or any foreign pension that’s exempt from taxes in Canada because of a treaty. To learn more about what’s considered eligible pension income, visit the federal government website.
3. Claim their medical expenses.
Is your parent a snowbird who needed to purchase medical insurance to travel abroad? Or maybe they needed to pay for prescriptions and other treatments during the year, such as eyeglasses or dental care? Your parent can claim what they paid for their eligible medical expenses to lower the amount of tax they owe.
If your parent is part of a couple, it’s usually better for the spouse with the lower income to claim them, because they’ll get a higher refund.
If you pay for your parent’s medical expenses and they depend on you for support, you might be able to claim their expenses on your return to lower the taxes you owe. Visit the H&R Block Online Help Centre to learn more about claiming your dependant's medical expenses.
Your parent can claim all or a portion of the medical expenses for which they haven’t been or won’t be reimbursed. For example, let's say their health insurance plan reimbursed them for 80% of their medical expenses, they can claim the remaining 20% on their return.
4. Claim tax credits if they have a disability.
If your parent has a disability, they might have some additional expenses that others don’t. To offset these costs, Canadians with disabilities can claim some additional tax credits.
The federal disability tax credit provides people with a disability or their family some relief by reducing the tax they owe. The maximum disability amount you can claim for 2020 is $8,576. To be eligible, your parent will need to have a disability tax credit certificate (form T2201) approved by the CRA.
If your parent doesn’t need the full disability tax credit, they can transfer unused amounts of this credit to their spouse. Or, if your parent depends on you for support, they can transfer the unused amount to you. Your parent will need to have the person they’re transferring these amounts to named on their disability tax credit certificate.
If you’re eligible for the federal disability tax credit, you’ll also be able to claim the corresponding provincial/territorial tax credit, which will vary based on which province or territory you live in. If you’re a resident of Québec, you can claim the amount for a severe and prolonged impairment in mental or physical functions if you have an approved federal T2201 certificate or a provincial certificate respecting an impairment (TP-752.0.14-V).
5. Claim the tax credit for caregivers.
If your parent depends on you because they have a mental or physical impairment, you might be able to claim the Canada caregiver amount (or the Québec tax credit for caregivers, if you’re a Québec resident). If your parent’s spouse has a mental or physical impairment which makes them dependent on your parent, your parent can claim this as their spouse’s caregiver instead. Visit this blog to learn more about tax credits for caregivers.
6. Find out which other tax credits for seniors are offered in your province or territory.
Depending on which province or territory your parent lives in, they’ll have different credits and deductions available to claim on their return.
For example, senior residents of Ontario might be eligible for the Ontario seniors’ public transit tax credit to help with the costs of taking public transit.
Similarly, Québec residents have specific tax credits available to them, such as the tax credit for Québec seniors’ activities (to help with the cost of registering for recreational activities), and the Québec tax credit for home-support services for seniors (if your parent needed to pay for services in order to continue living comfortably at home).