What to do for senior clients

Why read this?

Your client is 65 or older
Your client is responsible for his parents’ finances
Your client depends on her 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

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

SOLUTION:

If your client is 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 your client doesn’t file, her GIS payments could be interrupted. She 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 her pension income with a lower-income spouse to save tax.
- Ensure your client’s 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: Your client is eligible if she has less than $80,256 in annual income.
- Use line 301 on the Federal Worksheet to calculate her deduction and complete line 301 of the return.
- If your client’s partner claims this deduction and doesn’t need the entire sum to get his return to zero, your client may claim the unused amount.
Claim the pension income amount: Your client may be able to claim her 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 client’s pension income with her spouse, enter her total from line 314 on line A of Form T1032. Follow step four on T1032 to calculate the total pension income amount for her and her spouse.
Claim the Disability Tax Credit on line 316. Your client is eligible if:
- she has been ill, or is expected to be ill, for at least 12 months;
- her mental or physical functions are severely impaired at least 90% of the time; and
- her 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 your client is paying for her spouse’s care, she 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 your client has been taking care of an infirm partner, she can claim an extra $2,040 in the Spouse or Common-Law Partner Amount on line 303.
- The infirm spouse must make less than $13,078.
- 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.

Help seniors

Older investors need to be protected, says an IIAC report. This is because many don’t have the ability to replenish capital losses through future income; some are invested in higher risk investments or strategies; and retirement income fears can negatively influence their investment decisions.