How to file taxes if you’re older

Why read this?

• You are 65 or older
• You’re responsible for your parents’ finances
• You depend on your children

FACT

The average after-tax income of a married senior couple in 2011 was $56,500, according to Statistics Canada. This compares to a couple younger than 65, who made $76,100 in 2011, the year for which the latest data is available.

PROBLEM

You can claim nursing home fees as a medical expense or as part of the disability amount, but not both, CRA warns.

SOLUTION:

If you’re eligible for the Disability Tax Credit, claim just the salaries and wages of attendant care expenses as a medical expense, up to $10,000. Then claim the rest under the disability amount, suggests CRA.

What to do?

• File a return, regardless of income. If you don’t file, your GIS payments could be interrupted. You may also be eligible for GST/HST rebates and other credits, says Rick Barnay, partner, tax services, at PwC in Calgary.
• Split pension income. A higher-income partner could share up to half your pension income with a lower-income spouse to save tax.
  • Ensure your pension income is eligible. Most RRSP, RRIF or employer pension plans are included, but there are exceptions, says Barnay.
  • Fill out Form T1032 Joint Election to Split Pension Income.
    • The pension transferee reports the total on line 116 of the return, while the recipient reports on line 210.
• Claim the age amount: You’re eligible if you have less than $80,980 in annual income (2015).
  • Use line 301 on the Federal Worksheet to calculate your deduction and complete line 301 of the return.
  • If your partner claims this deduction and doesn’t need the entire sum to get his return to zero, you may claim the unused amount.
• Claim the pension income amount: You may be able to claim your pension, superannuation or annuity income.
  • Use line 314 of the Federal Worksheet to determine the eligible amount. Enter that amount or $2,000 (CRA’s maximum for the claim), whichever is less, on Line A of the return.
    • To split your pension income with your spouse, enter you total from line 314 on line A of Form T1032. Follow step four on T1032 to calculate the total pension income amount for you and your spouse.
• Claim the Disability Tax Credit on line 316. You’re eligible if:
  • you have been ill, or are expected to be ill, for at least 12 months;
  • your mental or physical functions are severely impaired at least 90% of the time; and
  • your legal representative and relevant doctor fill out Form T2201, Disability Tax Credit Certificate, and CRA approves it.
    • Many doctors charge a fee for filling out the form. Claim it in the medical expenses amount on line 330.
    • A partner can claim unused credit on line 326 of his return.
• Claim medical expenses like prosthetics and hospital visits on line 330.
• Claim attendant care expenses.
  • In-home: claim salaries and wages paid for service.
  • Nursing or senior’s home: claim full-time care.
  • If you’re paying for your spouse’s care, you can claim the expenses.
  • Eligible services include housekeeping, laundry, transportation and meal preparation. Food, rent and extra personal expenses aren’t covered.
• Claim the family caregiver amount. If you’ve been taking care of an infirm partner, you can claim an extra $2,058 (2015) in the Spouse or Common-Law Partner Amount on line 303.
  • The infirm spouse must make less than $22,060 if he or she is eligible for the family caregiver amount (2015).
  • Complete Form T2201.
  • Use Schedule 5 to calculate the claim and attach it to the return.

Sources: Rick Barnay, partner, tax services, at PwC in Calgary; CRA

Caring for parents

The children of dependant parents may also qualify for tax relief.

• If an adult is living with a senior parent, and the parent’s net income is less than $19,435, then the adult child can claim the family caregiver amount. The child should fill out line 315 on his return.
• If the parent is a dependant, the child could claim unused disability tax credit amount on his own return. Use line 318 of the Federal Worksheet to calculate the amount to transfer, and then put the total on the tax return’s line 318.
• If the child pays for his parent’s attendant care expenses he may claim the costs.

• Like pension splitting, not all types of income are eligible, so check with CRA.
• Attendant care from a partner isn’t eligible, and the attendant must be 18 or older.

Compiled by Jessica Bruno, content editor of Advisor Group.