If you’re an older taxpayer, you’re eligible for a wide range of tax breaks, some of which aren’t available to others.
Here’s a list of tax breaks for senior taxpayers to consider as we head into tax season.
Age amount. This non-refundable tax credit is available to individuals who were, at the end of 2016, aged 65 or older. The federal age amount for 2016 is $7,125. If your net income is $83,427 or greater, you aren’t entitled to the credit. If your net income is less than $35,927, you get the full amount. If you earn between those two amounts, you’re entitled to $7,125 minus 15% of the amount of your income that exceeds $35,427.
Pension income amount. If you’re no longer working, you may claim up to $2,000 in a non-refundable tax credit if you have eligible pension income. Eligible income includes pension or annuity income you received as payments for a pension or superannuation plan or from payments you receive from a Registered Retirement Savings Plans (RRSP).
Pension splitting. If you’re married or have a common-law partner, you may shift pension income from one partner to lower the tax liability of the family. If your spouse or partner earns less than you, he or she will likely have a lower tax rate. You can transfer up to 50% of your eligible pension income to your spouse or partner.
The extent to which pension income splitting is beneficial depends on the marginal tax bracket of you and your spouse or common-law partner, as well as the amount of qualifying income that can be split.
The pension income must satisfy certain criteria to qualify for splitting. If you’re 65 years of age or older, eligible pension income includes lifetime annuity payments under a registered pension plan (RPP), an RRSP, or a deferred profit sharing plan (DPSP) and payments from a Registered Retirement Income Fund (RRIF).
If you’re younger than 65, eligible pension income includes lifetime annuity payments under an RPP and certain other payments received as a result of the death of your spouse or common-law partner. Eligible pension income doesn’t include payments under the Canada Pension Plan (CPP) or Old Age Security (OAS) payments.
Pension income can also be split in the year of death, but there are special rules that apply depending on whether the pension income recipient or transferee has passed away. Consult with your tax advisor.
Medical expenses. These expenses can be significant for anyone, particularly as you get older. You can claim eligible medical expenses if you or your spouse or common-law partner:
Generally, you can claim all eligible amounts paid, even if they weren’t paid in Canada.
You may claim only the part of the expenses that you (or someone else) haven’t been — and won’t be — reimbursed for. However, the expense can be claimed if the reimbursement is included in your or someone else’s income and the reimbursement wasn’t deducted anywhere else on your income tax and benefit return. Generally, total eligible medical expenses must first be reduced by 3% of your net income or $1,813, whichever is less.
You also may aggregate medical expenses between you and your spouse and dependent children. When aggregated, one taxpayer reports the sum of the eligible expenses and receives the credit as long as the total expenses exceed 3% of that person’s net income, or $2,237. Your tax advisor can help you determine which spouse should use the aggregate medical expenses to claim the tax credit.
The credit covers a wide range of medical expenses, including prescription medications, and the amounts you pay to your doctors. If you have a doctor’s prescription due to certain conditions, you may get a tax break for air conditioning, bathroom aids and similar devices. When you list your medical expenses, you must be able to account for each cost with documentation, so keep your receipts.
Disability amount. Taxpayers, their spouses, common-law partners or dependents with severe and prolonged physical or mental impairments may be eligible for the disability tax credit (DTC). To determine eligibility, they must complete Form T2201, Disability Tax Credit Certificate and have it certified by a medical practitioner.
Caregiver amount. If, at any time in 2016, you (either alone or with another person) maintained a dwelling where you and one or more of your dependants lived, you may be able to claim a maximum amount of $4,667 ($6,788 if he or she is eligible for the family caregiver amount) for each dependant.
Each dependant must have met all of the following criteria:
Family caregiver amount. This credit, which differs from the caregiver amount, is an additional tax credit of up to $2,121 that can be claimed for one or more of the following amounts:
The impaired dependant must be 18 years of age or older. An individual under 18 may also qualify if the impairment is prolonged and indefinite and requires greater care than other children of the same age. This credit can be claimed for each impaired dependant. You may be able to claim this credit for more than one eligible dependant.
Spouse or common-law partner amount. You may claim this if at any time in the year you supported your spouse or common-law partner and his or her net income was generally less than $11,474.
Transferred amounts. You may choose to have some of your tax credits transferred to your spouse. Once your tax liability is reduced to, you can then transfer any additional tax credits to your spouse. Your spouse may do the same for you.
Home accessibility tax credit. If you made changes to your home to improve your quality of life, you may claim up to $10,000 in home improvement expenses. Among the expenses you can claim are: wheelchair ramps, walk-in bathtubs or wheel-in showers, widening of doors, non-slip bathroom flooring, ergonomic, easy-to-use, door locks and hands-free water taps. Relatives who support a related senior may also be eligible for this credit.
Goods and services tax/harmonized sales tax (GST/HST) credit. This tax-free quarterly payment helps you offset all or part of the GST or HST you pay. To receive this credit, you must file an income tax and benefit return every year, even if you didn’t earn income. If you have a spouse or common-law partner, only one of you can receive the credit. The credit will be paid to the person whose return is assessed first.
Public transit amount. You may be able to claim the cost of monthly or annual public transit passes for travel within Canada in 2016.
Consult with your tax advisor to determine any credits, deductions and benefits for which you’re eligible.