Of all the roles taken on by such baby boomers, providing support and care for elderly parents is among the most demanding. Such support can range from occasional help with the practical demands of everyday life, like shopping and cooking, to the need to provide a home for an elderly parent who can no longer live alone. The demands placed on family members who provide any level of care and support for elderly relatives take several forms, including physical, emotional, and, almost always, financial.
Some help with the financial costs of providing support to elderly parents is available through our tax system, usually in the form of non-refundable credits which reduce the tax otherwise payable by the supporting person or persons who are claiming the credits. Unfortunately, the overall system of credits relating to the support of a parent (or a grandparent) is complex, as each credit has its own set of eligibility criteria and income thresholds, and in some cases making a claim for a particular credit disqualifies the claimant from obtaining a different, similar, credit. Making sense of all the interrelated credits is difficult, especially for taxpayers who only deal with them once a year at tax-filing time. There is no doubt that some taxpayers miss out on credits which they are entitled to claim, simply because of a lack of knowledge or understanding of how the rules apply.
What follows is an outline of the most common kinds of claims available to an individual who is supporting an elderly parent, and the eligibility rules and restrictions which apply to each. It should be noted that such credits may also be claimed for other qualifying dependants but that the eligibility criteria may differ.
Medical expenses of a dependant
Increasing age usually means an increase in medical expenses, many of which may not be covered by government or private health care services plans. Individuals who support elderly parents are able to make a claim, for tax purposes, of the cost of such medical expenses, within prescribed limits. Generally, a supporting individual is entitled to claim any medical expense which exceeds $2,109 or 3% of the dependant parent’s net income, whichever one is less. Those expenses are then aggregated with other qualifying medical expenses, and 15% of that total is claimed as a non-refundable tax credit.
The list of expenses which qualify for purposes of the medical expense tax credit is long and complex, and subject to frequent change. The current listing of qualifying expenses is available on the Canada Revenue Agency (CRA) website.
Amount for an infirm adult dependant OR caregiver amount
Part of the complexity of claims relating to the support of adult dependants is the way in which those claims are inter-related. Individuals who support a parent or grandparent who is dependent upon them for that support because of mental or physical infirmity may claim either the amount for an infirm adult dependant or the caregiver amount yet cannot be both. In fact, if anyone can claim the caregiver amount for a particular dependant, no claim for the amount for an infirm adult dependant can be made at all.
The requirements and restrictions for each claim are different so a careful reading is needed to determine which credit might be available.
In order to claim the caregiver amount (claimed on Line 315 of the tax return), all of the following requirements must be met:
Where more than one person (a husband and wife or perhaps siblings) support the same parent or grandparent, the claim can be split between them.
In order to claim the amount for an infirm adult dependent (claimed on Line 306 of the tax return), the following criteria must be satisfied:
As with the caregiver amount, where support for a parent or grandparent is shared, the claim for the amount for an infirm adult dependant can be split.
Family caregiver amount
Perhaps in recognition of the fact that a need to provide care and support for elderly parents is a fact of life for an increasing number of Canadians, the federal government introduced (effective for 2012 and subsequent tax years) a new non-refundable tax credit known as the family caregiver amount. This amount allows qualifying taxpayers to claim an additional $2,000 over and above the usual amount claimable for the caregiver (Line 315) amount or the amount for an infirm adult dependent (Line 306).
Where eligibility for claiming any of these amounts requires that the parent or grandparent need support because of an impairment in physical or mental functions, that impairment must be documented by a statement from a medical doctor. That statement must outline when the impairment began, what the duration of the impairment is expected to be, and indicate that, because of that impairment, the individual is dependent on others.
Care provided in an institution
It often happens that the support needed by an elderly parent reaches a level of specialized care which can only realistically be provided in an institutional setting like a retirement or nursing home. Depending on the level of care required and the particular institution chosen, the cost of such care can be thousands of dollars per month. Such costs, are, however, treated as qualifying medical expenses. Generally speaking, costs which are paid for the care of the individual like nursing services, housekeeping services, personal laundry services, salon services, and other services relating to social activities will all be treated as eligible medical expenses. Costs incurred for rent and food will not.
Even from a brief summary, it is apparent that figuring out which credit claims can or should be made is a complex one. Some assistance with that process can be obtained from a CRA publication dealing with these credits and exemptions. That publication, entitled Medical and Disability Related Information (Guide RC4064), can be found on the CRA website at http://www.cra-arc.gc.ca/E/pub/tg/rc4064/rc4064-12e.pdf.