The Tax Benefits of Taking Care of Our Elderly
December 13, 2018 – Personal Income Tax
The benefits of taking care of our elderly are indeed reciprocating, both for the caregiver and the loved one. Apart from these precious moments in time, there are tax benefits too! As my old tax professor would say, “Tax is a microcosm of life”.
Canada Caregiver Credit
For 2018, the tax savings for an individual in Ontario can be up to $1,294 for care of a dependent relative with a physical or mental impairment. The tax savings are reduced when a dependant’s net income exceeds around $16,000.
Disability Tax Credit
For 2018, the tax savings for a disabled individual in Ontario is $1,657 for a severe and prolonged physical or mental impairment. If the disabled individual does not require the disability tax credit to eliminate taxes payable, the supporting relative can claim the credit to reduce his or her taxes. In order to claim the credit, a Disability Tax Credit Certificate must be completed by a doctor.
Home Accessibility Credit
For 2018, the tax savings for home renovations in Ontario can be up to $1,500 to help the elderly or disabled move more independently at their home or the supporting relative’s home, or 15% of home renovations up to $10,000. Both the caregiver and the cared one can combine these tax savings on their respective tax returns. You can claim these renovations as a medical expense credit as well.
Attendant Care and Nursing Home Medical Expense Credits
In-home personal attendant care fees and nursing home fees can be claimed as medical expense credits paid by either the supporting relative or cared one. For 2018, the tax savings from medical expense credits in Ontario are 20.05% of medical expenses incurred, less 3% of your net income, with a maximum net income ceiling of $76,733. For example, if your net income is more than $76,733, 3% of your net income in the formula will never exceed 3% of $76,733 or $2,302. So if your nursing home fees are $60,000, and your net income is $100,000, your tax savings are 20.05% of $60,000 or $12,030, less $2,302, or $9,728. In this example, you are recovering almost $10,000 on a $60,000 annual nursing home bill.
To claim attendant care and nursing home fees the Disability Tax Credit Certificate must be completed by a doctor.
With respect to in-home personal attendants, there is no requirement that the supporting relative live with the cared one. Personal attendants may also be needed at a nursing home. The salaries paid to these attendants can be claimed as a medical expense credit to a maximum of $10,000 annually, $20,000 in year of death, along with the nursing home fees.
When you claim attendant care or nursing home fees as medical expenses credits, you cannot claim the Disability Tax Credit as well, with one exception. You can choose to claim a maximum of $10,000 of attendant care fees annually ($20,000 in year of death) in combination with the Disability Tax Credit.
Other Medical Expenses
There are many other medical expenses that can be claimed. Most people are familiar with those that qualify such as prescription drugs or glasses, but there are other less obvious ones like batteries for hearing aids, diapers, scooters or walking aids, or transportation costs to obtain medical treatment where such treatment is not available locally.
Notice to Reader
Dean Constand CPA publishes this blog for information purposes only. Feel free to distribute to colleagues and friends. Although the material has been carefully prepared, it is not a substitute for professional advice.