By Farhana Uddin and the Sun Life team
Did you take care of an elderly or disabled family member during the pandemic? Here are some caregiver tax credits that will provide you with valuable financial assistance.
Did you care for an elderly or disabled family member during the COVID-19 pandemic? Anyone who has ever taken on this responsibility will tell you that it is a labour of love – with or without a pandemic.
Caregivers may spend several hours a week providing care to ageing parents. This, in addition to their own work and daily tasks.
Many of them pay for necessary expenses for their parents out of their own pockets. Here are some examples:
Prescription or over-the-counter medications
Transport
Specialized devices
rehabilitation
Accommodation modifications
Of course, seniors are not the only ones who need care. It is possible that your spouse or one of your children is disabled or has special needs. Whatever the situation, it is undeniable that accompanying a sick or disabled person requires a lot of time and money.
But how do you ease some of the burden on you as a caregiver? Tax season is already underway. This gives you the opportunity to take advantage of all the non-refundable tax credits available to caregivers. Here are a few to consider when filing your return.
Non-refundable tax credits for informal caregivers
What is a non-refundable tax credit? It is a credit that reduces the amount of tax you have to pay.
For example, a tax credit of $500 will make you pay $500 less in taxes. (By comparison, a tax deduction decreases your income, so you pay less tax. The decrease depends on your tax bracket.)
It is essential to understand that a non-refundable tax credit reduces the amount you have to pay. However, you do not receive any money from the government. So if you owe $400 to the taxman, a tax credit of $500 will reduce your bill to zero. However, you will not be granted the additional $100. (This is the “non-refundable” part.)
The government alleviates medical expenses and disability-related costs through these tax credits to distribute the tax burden better since most taxpayers do not have to assume such costs.
Here are four non-refundable tax credits to be aware of when preparing your tax return this year:
- Medical Expense Tax Credit (METC)
Do you pay the dental bills of a loved one out of your pocket? Or his accommodation in a long-term care facility? If so, you could get tax relief through the Medical Expense Tax Credit (METC).
Deciding to move your parents to a long-term care facility
What is the CIFM, and how much is it? The METC provides a non-refundable tax credit for “eligible medical expenses”. This amount may exceed a certain threshold, i.e. 3% of net income or $2,397 (2020 threshold, indexed to inflation) if this amount is lower. (Threshold may vary by province.)
For Quebec provincial tax purposes, the threshold is 3% of the combined net income of both spouses, so there is no “if this sum is less”. This means that there is no monetary threshold for Quebec provincial decisions.
What medical expenses qualify for the credit? You can claim all eligible medical expenses that were not reimbursed to you by a health insurance plan or otherwise.
You can claim reimbursement for your expenses and those of your spouse and children. You can also claim credit for others who depend on you:
adult children
Adult grandchildren
Grandparents
Parents of your spouse
For example, you took one of your dependent relatives to the dentist, who charged $700. The $700 you paid could qualify for the CIFM.
Your parents or dependents do not have to live with you for you to get this credit. That said, they must be Canadian residents, and you must ensure their financial support throughout the year.
Find the best dentist, chiropractor or another healthcare professional near you.
Here is an overview of eligible medical expenses:
Expenses incurred with healthcare professionals (e.g. dentist, nurse, pharmacist, optometrist, psychologist, chiropractor, podiatrist, therapist, dietician)
Medical services not covered by insurance (e.g., laser eye surgery)
Medical care outside Canada
Prosthetics or health devices (e.g., prescription glasses, wheelchair, hearing aids, crutches)
Medications
