Some tax credits are specifically aimed at retired people, and others are often applicable to seniors. Here’s an overview of six non-refundable federal tax credits seniors can use to reduce their tax burden.
As a general rule, the amount of a tax credit isn’t the amount that will be deducted from your taxes. That’s because you’re allowed to claim a percentage of that amount. For example, 15% of a $2,000 amount means a deduction of $300, not the full $2,000.
A non-refundable tax credit can reduce or cancel out the tax you owe. However, if the total of the credits you’re entitled to is greater than the tax owing, you won’t get an actual refund.
Because of the Quebec abatement, the percentage of federal tax credits that Quebec residents are allowed to claim is lower than for residents of other provinces. This means that the federal tax savings are less. Generally, the rate is 12.525% for Quebec residents and 15% in the rest of Canada.
You’re eligible for this credit for the 2020 tax year if:
- You were aged 65 or over on December 31 of the tax year.
- Your individual net income (after deductions) is less than $89,422.
If your income is less than $38,508, you’re entitled to the full amount of $7,637, for a maximum credit of $1,146. Because of the Quebec abatement, the maximum value of the credit is $957 for Quebec residents.
If your income is between $38,508 and $89,422 you will be eligible for the credit, but the amount of the credit decreases as income increases.
You can transfer all or part of the credit to your spouse, if you were a couple at the end of the year. For more details, visit the Canada Revenue Agency website. Don’t forget to claim the same credit in your province or territory of residence, if it is available.
- You may be able to take advantage of this tax credit if you receive eligible pension income.
- It doesn’t apply to government benefits like the Canada Pension Plan (CPP), the Guaranteed Income Supplement (GIS), Old Age Security (OAS) or the Quebec Pension Plan (QPP).
The maximum eligible amount is $2,000, which results in a $300 tax credit ($251 for Quebec residents, due to the abatement). The credit will be lower if your eligible pension income is under $2,000.
If you don’t receive pension income directly, but your eligible spouse splits their pension income with you, you may also be eligible for the pension income amount. You will still need to meet all the criteria. Don’t forget to claim this tax credit from your province or territory of residence, if it’s available.
- You can claim the medical expense tax credit at any age.
- You’re eligible if you’ve paid medical expenses for yourself, your spouse, your children aged under 18 or another dependent (e.g., your parents).
- You can’t claim for expenses that have already been reimbursed by private insurance.
There’s no maximum amount for this credit. However, it applies on 15% of the amount that exceeds the lesser of these two amounts: 3% of your net income (line 23600 of your tax return) or $2,397.
The federal government publishes a list of eligible expenses each year.
One special feature of this credit is that it can be claimed for a period of 12 consecutive months. This allows you to choose the period that is most advantageous for you, such as August to July of the following year.
Don’t forget to include your health insurance plan premiums.
A similar credit may be available in your province or territory. Don’t hesitate to claim it if you’re eligible. Remember that the list of eligible expenses may differ from one place to another.
You can also transfer it to your spouse.
- To be eligible, a person must have a physical or mental impairment that is severe and prolonged (lasting at least 12 months).
- The impairment must also affect their daily life or have the potential to affect it if not treated.
The maximum eligible amount is $8,576, for a maximum credit of $1,286 ($1,074 for Quebec residents, due to the abatement).
This type of credit also exists in some provinces and territories. In certain cases, it can be transferred to a family member who cares for the person affected.
Being eligible for this credit gives you access to other programs and credits, such as the Registered Disability Savings Plan (RDSP) or the home accessibility tax credit.
- You may be eligible for this credit if you are aged 65 or over or if you are entitled to the disability tax credit.
- To apply for this credit, you must have incurred expenses to upgrade or renovate an eligible dwelling (see the CRA’s list).
You can claim for up to $10,000 in eligible expenses. The value of the credit depends on the eligible expenses actually incurred. The maximum value is $1,500, or $1,252.50 for Quebec residents with the abatement.
You can also claim it for your spouse and, in several cases, for dependents (read the CRA’s definition).
- You’re eligible for it if, during the year, you supported your spouse, minor child or another eligible relative with a physical or mental impairment (see the federal government’s criteria).
The amount you can claim depends on your relationship with the person you care for.
For a spouse, the maximum eligible amount is $2,273. The value of the credit is $341, or $285 for Quebec residents with the abatement.
If the eligible dependent is aged 18 or over, and you are supporting them because of a physical or mental impairment, the maximum eligible amount is $7,276. The value of the credit is $1,091, or $911 for Quebec residents with the abatement.
You don’t need to be eligible for the disability tax credit to be eligible for this credit. However, a medical practitioner may need to confirm that the person you’re caring for has a physical or mental impairment.
Other measures are available to support caregivers.
After reading this article, you should be better equipped to lower your taxes. Of course, this is only an overview. There may be other credits, benefits and strategies open to you, both on the federal level and in your province of residence. For example, there’s pension income splitting and the GST credit. In Quebec, there’s the tax credit for seniors’ activities, the tax credit for home-support services for seniors and the independent living tax credit for seniors. To learn about all your options, take the time to meet with your advisor. We’re here to answer your questions.
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