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Tax Credits For Retirees

26 February 2021 by National Bank
cerb tax

Whether you’re already retired or looking forward to retiring soon, there are a variety of tax credits that can reduce your taxes. Here’s an overview of nine federal tax credits you should know about. Some of them are refundable (payable even if you don’t owe any taxes) and others are non-refundable (you have to pay tax to benefit from them).

Age amount

Who is it for?

This is for people aged 65 and over at the end of the tax year. You’re eligible for this credit for the 2020 tax year if you turned 65 on or before December 31, 2020.

Don’t forget to apply for the same credit in your province or territory of residence.

How much?

At the federal level, your net income (after deductions) must be less than $89,422, and the amount eligible for the credit is $7,637, for a credit of up to $1,146. In Quebec, due to specific tax arrangements, the maximum value of the federal credit for individual Quebecers is $957.   

Good to know

You can transfer all or part of it to your spouse if you’re living together at the end of the year. For more details, visit the Canada Revenue Agency website

Pension income amount

Who is it for?

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 Quebec Pension Plan (QPP), the Guaranteed Income Supplement (GIS) or Old Age Security (OAS).

Only certain types of pension income are eligible for this tax credit, depending on the individual’s age.  Don’t forget to apply for this credit from your province or territory of residence. 

How much?

Up to $2,000.

Medical expense tax credit

Who is it for?

There is no age requirement to make a claim for eligible medical expenses. This credit is designed to help you pay for medical expenses for yourself, your spouse, children under the age of 18 or other dependents (such as your parents). You can also transfer it to your spouse. The federal government publishes a list of eligible expenses each year.

How much?

There’s no upper limit for this credit, but your expenses must be greater than the lesser of these two amounts: 3% of your net income (after taxes and deductions) or $2,397. 

Good to know

Depending on your situation, transferring this credit to the spouse with the lower income may help maximize the tax impact.

Don’t forget to include premiums paid by you or your spouse to a health insurance plan when you’re adding up your medical expenses. If you live in Quebec, add the premiums paid by your employer too.  This may help you reach the threshold to take advantage of the credit.

If you live in another province, a similar credit may be available. Don’t hesitate to apply for it if you’re eligible. Remember that the list of eligible medical expenses may vary depending on the province or territory.  

Refundable medical expense supplement

Who is it for?

This supplement allows individuals with a low income to benefit from tax assistance for medical expenses.

How much?

For the 2020 tax year, an individual is eligible for this federal supplement if their employment income is at least $3,714. The maximum value of the credit is $1,272. A reduction applies from $28,164 in net family income. Taxpayers whose net family income is in excess of $53,604 are not eligible for the credit.

Good to know

This measure may exist in some provinces and territories. Check out the list of eligible expenses and consider applying for this supplement.

Home accessibility tax credit 

Who is it for?

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).

How much?

You can claim for up to $10,000 in eligible expenses. The value of the credit that can be granted will depend on the eligible expenses actually incurred and the maximum amount that can be claimed.

Good to know

You can also claim this non-refundable tax credit for your spouse and, in several cases, for dependents (read the CRA’s definition).

Disability tax credit

Who is it for?

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 definition is broad (see the CRA criteria).  It could encompass both a healthy 20-year-old who is blind as well as a 95-year-old who can no longer walk or get dressed independently.

This type of credit also exists in some provinces and territories. 

How much?

This is a non-refundable credit and the maximum you can claim is $8,576.

Good to know

A medical practitioner must confirm your eligibility for this credit (using this form).

The Canada caregiver credit

Who is it for?

The Canada caregiver credit (CCC) is one of the measures introduced by the federal government to support caregivers. 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).

How much?

The amount you can claim depends on your relationship with the person you care for. For your spouse, you can claim $2,273.  If the eligible dependent is aged 18 or over, and you are supporting them because of a physical or mental impairment, you may be able to claim up to $7,276.

Good to know

This is a non-refundable credit. As with the disability tax credit, a medical practitioner may need to confirm that the person you’re caring for has a physical or mental impairment.

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Caregiving benefits

Who is it for?

There are different benefits depending on which of the following three situations applies: caring for a child, caring for an adult, and caring for a person in need of end-of-life care (compassionate care benefits).

How much?

You may also be eligible for benefits of up to 55% of your gross salary, to a maximum of $595 per week (taxable).

Guaranteed Income Supplement 

Who is it for?

People aged 65 and over who receive the Old Age Security (OAS) pension may apply for the Guaranteed Income Supplement (GIS) if their income is below a certain amount. This non-taxable amount supplements benefits received to raise the recipient’s standard of living.

How much?

You could receive up to $919.12 per month (for a single eligible person: see full details on the Canada Revenue Agency website).

Good to know

To be eligible:

  • Your income must be less than $18,648 if you are single, widowed or divorced. 
  • Your income together with your spouse’s income must be less than $24,624 (if your spouse receives the full OAS pension).
  • Your income together with your spouse’s income must be less than $44,688 if your spouse doesn’t receive an OAS pension or if they receive the Allowance (a benefit for low-income individuals aged 60 to 64).

After reading this article, you should be better equipped to lower your taxes. Of course, this is only an overview. There may be other strategies and credits 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.

 

Our advisors can help you plan your retirement. 

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