Filing taxes for a senior? 7 things you can do to maximize their return.
January 18, 2017
Whether you’re caring for 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 taxes.
1. Make sure they file a tax return:
Sounds simple, but some folks think that if they didn’t earn an income, they shouldn’t file a return. Filing always makes sense, because they could be entitled to other credits, deductions and benefits that get triggered once they file a tax return. For example, they’d need to file to receive the Guaranteed Income Supplement (GIS) – and filing late could interrupt the GIS benefit, GST/HST credits and other automatic benefits.
2. Split pension income:
Seniors are allowed to split up to half of their eligible pension income with a spouse or common-law partner, so they can assign a portion of what they earned throughout the year to their better half. This can mean a significant tax reduction when one spouse has very little income, and the other has a lot. Another way to reduce taxes is through transfer amounts. If one parent is unable to completely offset their age amount, pension income and disability amount against their taxes payable, they can transfer the unused portion to their spouse’s return.
3. Claim medical expenses:
A portion of most medical expenses can be claimed! If your parent is part of a couple and the spouse with the lower income owes any tax, it usually makes the most sense for that person to claim them. Are your parents globetrotters? If they travelled to another country and purchased medical insurance for the trip, it’s considered a medical expense. If they traveled to obtain medical treatment that wasn’t available where they live, they might be able to claim the cost of transportation, meals and accommodation, depending on how far they needed to go.
4. Claim the caregiver amount:
If your parent (or parents) are dependent on you by reason of mental or physical infirmity you may be eligible to claim the Canada caregiver amount. You will need a note from their doctor describing their condition. The Canada caregiver amount is worth $6,986 less their net income in excess of $16,405. This means that the amount is reduced to zero if their income is in excess of $23,391.
5. Split the disability tax credit:
If your parent qualifies for the Disability Tax Credit but doesn’t have enough taxable income to take full advantage of it, they might be able to transfer an unused amount to you. In order to qualify for this, your parent must depend on you for all or some of the basic necessities of life.
6. Claim the cost of attendant care:
If a senior is living in a retirement home and is eligible for the Disability Tax Credit, they can claim the costs relating to attendant care as medical expense. To make this claim, the retirement home must provide you with an invoice detailing the amount paid for attendant care, which includes housekeeping, laundry, transportation and meal preparation. Rent and food expenses are not covered. If you claim attendant care in excess of $10,000, you cannot also claim the disability tax credit.
7. Claim nursing home expenses:
For full-time care in a nursing home, there’s no limit on the total that your parents can claim as medical expenses. If you pay your parents’ nursing home fees, you might be able to claim them as a medical expense, however you’ll be subject to limits. It’s important to know that you can’t claim both nursing home fees and the Disability Tax Credit, so it might make more sense to restrict your claim to the attendant care portion of the fees, as long as they don’t exceed $10,000.
Want more cash in your pocket for making memories? If you’re in your golden years or taking care of a family member who is, take a minute to review what credits and deductions you could both be eligible for.