Are you a caregiver that is financially supporting the person you are caring for? Are you paying for prescriptions, transportation and parking fees, meals, professional assistance at the home, adult day programs, or medical devices/aides? Read on to learn about federal tax credits for caregivers in Canada.
Canadian caregivers are spending millions of dollars every year on what are referred to as out-of-pocket expenses. The latest statistic comes from 2017, where caregivers paid on average $275 per month or $3300 per year.
Many people don’t have an extra $275 to spend each month and are dipping into savings, reducing personal spending, saving less for retirement, and even going into debt by taking out loans or maxing out credit cards. Can you relate to this?
Track out-of-pocket expenses
Do you keep track of these out-of-pocket expenses?
If you don’t, now is the perfect time to begin to keep track of your spending and organize your receipts! This will help you decide whether to apply for federal tax credits that are available to caregivers. There is a really helpful FREE app from RBC Ventures which is now available, called CareEasy. What I love about this app is that is an avenue for family members to discuss and be transparent about the costs of caregiving, and ideally, share these costs/expenses.
As it is now, financial benefits for caregivers in Canada are mostly in the form of federal tax credits or insurance benefits. Nova Scotia is currently the only province in Canada with a caregiver allowance, called the Caregiver Benefit program (‘though spouses aren’t eligible). I hope that one day all provinces in Canada offer a caregiver allowance to relieve some of the financial costs of caregiving. In the meantime, definitely take advantage of these federal tax credits:
Eligibility criteria for the ‘Disability Tax Credit Certificate’?
In order to be eligible for the Disability Tax Credit and the Canada Caregiver Credit you have to first get a Disability Tax Credit Certificate. A form called the T2201, has to be completed by a health care provider, including a family doctor, nurse practitioner or a specialist (such as an audiologist, speech language pathologist, occupational therapist, or optometrist).
To qualify, the disabled person must have a “significant impairment of their mental or physical functions resulting in their ability to perform at least one of their basic daily life activities being markedly affected.” It also has to be prolonged which means it has lasted or is expected to last at least 12 months.
If you aren’t sure about eligibility, talk to your health care provider or specialist about it. Once approved, the Disability Tax Credit Certificate is submitted by the person with the disability to the Canada Revenue Agency, and then the Disability Tax Credit and the Canada Caregiver Credit can be claimed.
Determining eligibility for the Disability Tax Credit (DTC)
You must have taxable income to apply for this credit. The maximum disability amount is $8325 (if there is a negative tax balance, there is no refund). It may be possible to claim up to 10 years of DTC retroactively.
If the Disability Tax Credit Certificate (above) has been approved, a supporting person can apply for this credit if they are a common-law partner, spouse, parent, child, grandparent, grandchild, sister, brother, aunt, uncle, niece, or nephew and the disabled person relies or relied upon them for food, shelter, and clothing.
This credit is claimed on your tax return (line 31 if you are applying as a supporting person).
How to claim the Canada Caregiver Credit (CCC)
This replaces The Caregiver Amount, The Amount for Infirm Dependants (18 & older), and The Family Caregiver Amount.
Like the Disability Tax Credit, you must have taxable income in order to claim the credit. Credits are about reducing the amount of income tax that needs to be paid. The credit starts when the total amount of medical expenses (this includes mileage and meals) is greater than 3% of the claimant’s net income.
A supporting person (again, one who must have taxable income) can apply for this credit. This is defined as: a spouse, common-law partner, parent, minor child, grandparent, grandchild, sister, brother, aunt, uncle, niece, or nephew. The credit can be shared by more than one caregiver, although this can make it complicated at tax time (an alternative to this is to have one person submit it and split the return).
The claimant does NOT have to live with the person, but the person has to be dependent on you for support due to a “medical or physical infirmity” (already determined with the Disability Tax Credit Certificate). The maximum CCC amount is $6883, for which you can claim a 15% non-refundable federal credit.
This credit is claimed on your tax return (line 303, 305 or 307).
How to apply for the Home–Accessibility Tax Credit (HATC)
This is a maximum of $10,000 per year that can be applied to renovations or alterations to a residence to increase mobility or reduce the risk of harm. Expenses which can be submitted can include building materials, fixtures, equipment rentals, building plans, permits, and labour costs.
This does NOT include you and your cousin Bill’s labour as enthusiastic and amateur do-it-yourself-ers!
If you can claim the Disability Tax Credit (DTS), you can claim this Home-Accessibility Tax Credit. Individuals who are over sixty-five also qualify to apply for this credit.
To claim the HATC, complete a Schedule 12 (Home Accessibility Tax Credit) in your income tax return.
How to apply for the Medical-Expense Tax Credit (METC)
Like most tax credits, you can only claim if you have taxes owing or payable because it is a tax credit, not an allowance or pension. The METC is for expenses that exceed the lower of either $2302 or 3% of your net income.
Be sure that you claim only eligible medical expenses.
You claim this amount for a dependent (includes your parents) on Line 331 of your tax return.
You can claim both the Home Accessibility Tax Credit (HATC) and the Medical-Expense Tax Credit.
This can be claimed for a child less than 18 years of age or of any age if the child is mentally or physically impaired. To be eligible, the claimant must not have a spouse or common-law partner, been separated from their partner with no support (provided or given), supported the child in the tax year, and lived with the child in a home maintained by the individual.
This tax credit allows caregivers to claim an additional amount for dependents who have an “impairment in physical or mental functions.” Also, the dependent must live with you, rely on you for support with the impairment, and have little or no income. An eligible claimant can receive a tax credit for their parent or grandparent by blood, marriage, common-law partnership, or adoption, or for their child, grandchild, brother, or sister by blood, marriage, common-law partnership, or adoption if they are under 18 years of age or have a physical or mental impairment.
Claims up to $2,040 in tax credits can be claimed above what can already be claimed for an eligible dependent.
Please note that eligibility criteria and claim amounts do change, so it is wise to go right to the Canada Revenue Agency. If this overwhelms or stresses you out, I recommend calling the Canada Revenue Agency and speaking to an agent who can explain your options and help determine your eligibility, or speak to a tax accountant about tax credits for caregivers.
What does the coronavirus pandemic not stop? Tax season! Bookmark this page today for reference.