Me and My Money

Saving Seniors Tax

Posted April 10, 2012
Originally Published March 26, 2012

Erica Melanson’s father worked in a bank for 32 years before retiring at age 63.  Every March he was a busy man, happily completing tax returns for five family members.

Last year Erica’s father Gil, then 86, surprised her by asking for help in finding an accountant.  “Dad read a few articles in the newspaper which got him thinking that maybe he wasn’t getting all the deductions he should for him and Mom.”  Gil Melanson was right.     

A review of his recent returns showed a number of areas where he could lower household net income.  Her mother Margaret, for example, has been largely confined to a wheelchair with oxygen support for the past three years and her father has diabetes and requires dialysis.  Both of them qualified for the disability tax credit (DTC) and they have applied for adjustments going back three years for Margaret and five for Gil. 

While seniors with low income might not benefit, the DTC  ($7341 for 2011) could be transferred to a relative.  According to a CRA spokesperson, “If the senior is being cared for in your home or is dependent on you for all or some of the basic necessities of life (food, shelter, and clothing) on a regular and consistent basis,” then the DTC (line 316) can be transferred.

In order to make the DTC claim on your return the qualifying person needs to be a close relative including parent, grandparent, uncle or aunt.  You must also have claimed, or been eligible to claim, an amount for them on line 306 (for infirm dependents 18 or older) or on line 315 (caregiver amount.)

The key to the tax credit is the disability tax certificate.   To qualify an individual must have a mental or physical condition (or combination) that significantly impairs their daily functioning.   The CRA form T2201 requires a self-assessment plus an assessment by an appropriate medical practitioner.    If you can prove that the disability has existed for some time you can request a review going back up to 10 years.

There is often confusion and disappointment surrounding the DTC.  A person can receive CPP or Quebec Pension Plan disability benefits, workers’ compensation or insurance related to an inability to work.  But this doesn’t automatically mean eligibility for the tax certificate.

Moreover, because age-related physical and mental impairment often happens gradually over a long time period, seniors (and their caregivers) might not consider the DTC.  Also, disabled is a loaded word.  Many don’t think of themselves that way, even if it is for tax purposes.

This was the case with my father who didn’t apply for my mother, though she had advanced dementia.  And though virtually deaf, he didn’t investigate the DTC for himself because the deterioration had happened over more than 20 years.   But he was certainly thrilled when I filled out the forms on their behalf and he got a sizable refund as a result.

The federal caregiver amount of $4,282 could benefit a family member if the senior lives with them and has a net income of less than $14,624.  This can result in tax savings of up to $640. Up to an income of $18, 906 a partial amount can be claimed.

Another often-missed deduction is attendant care paid to a retirement home.  A senior who is eligible for the DTC can claim this amount as a medical expense.  Included are services such as housekeeping, laundry, transportation and meal preparation.  The retirement home should provide a detailed invoice that separates rent and the cost of food (different than meal preparation.)  

“If someone claims the disability amount for the senior (including the senior himself), the maximum that may be claimed for attendant care is $10,000,” explains Cleo Hamel, senior tax analyst with H&R Block. “A senior can claim part-time attendant care in their home as long as that condition is met.” There is more information on this and the DTC in the booklet, RC4064 Medical and Disability Related Information.

Low-income seniors may also be eligible for the Refundable Medical Expense Supplement if their net income is greater than $3,179 but less than $24,108.  The maximum amount refundable is $1,089 for 2011.  Also seniors with simple returns may be able to file their taxes by phone (1-800-959-1110.)  A social insurance number and telefile access code is required.

On a slightly different not, H&R Block reminds older Canadians that they can claim the cost of purchasing medical insurance to travel to another country or if they live part of the year outside Canada.

Also qualifying low-income seniors can file their taxes by phone.  Call 1-800-959-Lowering taxable income can have an impact on government benefit claw backs.  Many seniors don’t realize that the age amount tax credit ($6,537 for 2011) for those 65 and older declines once net income reaches $32,961.   It disappears completely when net income exceeds $76,541.   So, any credits or deductions missed means not only more tax payable but also reduced benefits.

One of the most valuable tax strategies for senior couples is pension splitting (up to half of CPP and other eligible pensions.) Not only can this have a significant impact when one spouse has no or little taxable income but it could affect eligibility for the Guaranteed Income Supplement (GIS), which is reduced as income rises.

Income tax rules change annually so if you are a senior or have one in the family, it’s worth taking a second look to ensure every possible deduction is maximized.

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