How personal tax credits work
Individual taxpayers in Canada are entitled to claim certain personal, non-refundable income tax credits. Each type of tax credit has a certain “amount” associated with it. The total of all tax credit “amounts” an individual is entitled to claim is then multiplied by 20.05 per cent, and this product is deducted from the amount of income tax otherwise payable by the individual. If the amount of non-refundable tax credits is greater than the amount of tax owing, the excess is “lost” to the individual unless they can be transferred to another eligible taxpayer.
Disability tax credit
This credit is claimed by an individual who meets the criteria of being “disabled” as provided in the Income Tax Act. If the individual with Alzheimer’s disease does not have sufficient income to benefit from the disability credit, the unused portion of the credit may be claimed by the individual’s spouse or a relative on whom the individual is dependent. The disability credit amount is $7,766 for the 2014 tax year.
Note: A T2201 tax form (Disability Tax Credit Certificate) must be completed by a physician who has examined the individual and this form must be filed with the first tax return on which the disability credit is being claimed. Therefore, the first tax return on which the disability credit is being claimed generally cannot be filed electronically and must be filed on paper.
The caregiver tax credit
As a caregiver caring for a disabled relative who is dependent on you, you may be eligible for the caregiver credit if, at any time during the year, you maintained a dwelling where both you and the disabled dependent live. The caregiver amount is $4,530 for 2014, but this may be reduced if the disabled dependant earned more than $15,472 during the year. Additionally, you may also be entitled to a credit of $2,058 if you qualify for the family caregiver amount. If you and another person support the same dependent, you may split the claim between you (although some rules apply).
Medical expense tax credit
Qualifying medical expenses that were paid for yourself, your spouse and your minor children during any period of 12 consecutive months ending in the taxation year are eligible for a tax credit. You may also be able to claim medical expenses paid in respect of adult children, grandchildren, parents, etc., who are dependent on you. You may choose any 12-month period ending in the year that maximizes the amount of your medical expense claim (provided you haven’t already claimed these expenses on a previous tax return). In the year a person dies, you may claim medical expenses for a 24-consecutive-month period preceding the date of death. Only medical expenses in excess of $2,171 or three per cent of your net income (whichever is less) can be claimed. Examples of expenses that may qualify for the medical credit include prescriptions, eyeglasses, medical practitioner fees (doctor, dentist, optometrist, surgeon, registered therapist, etc.), lab or diagnostic fees, medical equipment (wheelchairs, etc.), attendant care, nursing home fees, long-term care, travel to obtain medical services, and ambulance fees. In some cases there are restrictions on your ability to claim these expenses. You cannot claim any portion of expenses that are reimbursed to you or paid by another party (for example, a medical insurance plan). Please note that it is essential to keep careful records of all medical expenses.
The infirm dependant credit
The infirm dependant credit can be claimed by a relative of an individual who is at least 18 years of age, disabled and dependent on the relative because of their infirmity. The infirm dependant amount is $6,589 for 2014 and is reduced if the disabled individual’s income exceeds $6,607. You can’t claim the caregiver credit and the infirm dependant credit in respect of the same person.
Ontario property and sales tax credits – involuntary separation
Unfortunately, spouses often become involuntarily separated for medical reasons; for example, when an individual with dementia must reside in a long-term care (LTC) facility. In this instance, each spouse may separately claim the Ontario property and sales tax credit. Rent or fees paid to a care facility may or may not qualify for the Ontario property tax credit. Generally, where the LTC facility is subsidized or exempt from property tax, you can’t consider any portion of the LTC fees for the property tax credit. The administrator of the home will be able to advise whether any portion of the fees paid will qualify for the property tax credit.
If you neglected to claim any of the above credits in a previous tax year but may have been entitled to do so, you are able to request that the government adjust your previous returns to include these credits using a T1 Adjustment Request form. You have three years from the date a return is assessed during which you can request an adjustment to that return. After the three-year period has passed, they will generally not allow a return to be changed, although in some cases they will permit adjustments to returns going back as far as 10 years.
If you would like a copy of the Disability Tax Credit Certificate from the Canada Revenue Agency or would like a package prepared by Ken Garth of BDO Canada LLP on income tax information for families of Alzheimer’s patients for the 2014 income tax year, they may be picked up at the Alzheimer Society of Muskoka office.
Please note that the tax information provided herein may not consider all possible complications that may apply to your particular circumstances and should be considered as general advice only. For more information on non-refundable tax credits or tax planning for family caregivers, please contact your tax advisor for individual advice.
Karen Quemby is the executive director for the Alzheimer Society of Muskoka.
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