The Christmas holidays always seem to come and go quickly, and are now firmly in our rear-view mirrors. So now, we get to deal with tax credits …
It may not have the same ring to it, but since so many people are caregivers, or are otherwise not necessarily aware of tax “breaks” or credits they may be entitled to, it is useful to review them, since we are not far from April.
Caregiver Tax Credit
It appears from the literature that not many Canadians are aware of this tax credit.
Of course there are qualifications, and there has to be a doctor involved. Here it is:
a) You have to be caring for a disabled relative
b) The relative has to be “dependent” on you
c) You live with that relative in the same dwelling
d) You are maintaining that dwelling.
Right now the credit amount is $4,667 if the disabled dependent earns under $15,940. If the dependent earns more, the credit will be reduced.
You can, as the caregiver, also claim an extra $2,121 if you qualify for the Family Caregiver Credit.
Schedules 1 and 5 on your tax return will be required and, at least initially, CRA will probably need a form T2201 (the Disability tax credit certificate), filled out by a doctor, giving their opinion that your relative is disabled.
It is also worth speaking with an accountant to make sure it is done right and sent to the right place.
Infirm Dependent Credit
This is not well-known, either. The most important thing is that a person cannot claim both the Caregiver Tax Credit and the Infirm Dependent Credit.
More than likely, you would claim the Infirm Dependent Credit if you cannot qualify for the Caregiver Tax Credit.
To qualify, a person:
a) Has to be related to an individual
b) That individual has to be at least 18 years old
c) That individual has to be disabled
d) That individual has to be dependent on the person because of their disability.
The credit amount is $6,788 now, but it gets reduced if the disabled person has an income above $6,807.
You claim this in Schedule 1 of your tax return, and you will of course need to prove the disability (a doctor will have to assist here, through the T2201 form).
Disability Tax Credit
This is perhaps the most popular, well-known tax credit, and many Canadians receive it
To qualify, a person must be disabled. Again, a doctor will need to complete the T2201 form and CRA will have to approve it. The tax credit amount at present is $8,001.
If the disabled person does not earn or receive enough income to use the full credit, the leftover credit may be transferred to their spouse or a relative whom the disabled person is “dependent” on.
The T2201 form is completed and sent in to CRA with the disabled person’s tax return in the first year that the person claims the disability tax credit.
Therefore, note that this first tax return cannot be filed electronically. Also, note that it is not necessary to file the T2201 form every year, unless CRA asks for proof that the disabled person is still disabled.
Medical Expense Tax Credit
This tax credit has been around for years and is fairly well-known, but is not known to be a really useful tax credit, in my view. That is mainly because it is not easy to qualify for it.
Here is what you need to qualify for a credit:
a) The medical expenses were paid by you
b) The expenses were paid on behalf of yourself, your spouse or your minor children, as well as dependent adult children, grandchildren and parents
c) The expenses were paid during the tax year in which you claim them
d) The medical expenses must be “qualifying medical expenses,” which start with medical expenses you do not receive any reimbursement for from any other sources, such as a private insurance company.
There are many eligible medical expenses. To find whether you have any, you can check online and you can (and should) speak with an accountant.
However, two expenses that may be claimed are attendant care costs and nursing home fees.
The expenses you can actually claim, in terms of amount, are the lesser of:
a) Expenses in excess of $2,237, OR
b) Expenses in excess of 3% of your net income.
Whether or not you have any kind of insurance to cover health-care costs, you owe it to yourself and your relatives to make sure you and your relatives are claiming all the credits they can under existing tax rules.
Health-care costs will continue to rise and the rules will continue to change, so you need to keep on top of them and have an accountant as well.
I have no hesitation in concluding that Canadians probably “under claim” these credits, so more vigilance is needed to make sure that changes.
Getting back some funds with your next tax return could make May the second-most wonderful time of the year!
This ad ran in the Richmond News on January 27, 2017.