Have you been caring for an elderly or disabled family member during the COVID-19 pandemic? Anyone who’s ever been responsible for looking after someone can tell you it’s a real labour of love – with or without an ongoing pandemic.
For example, unpaid caregivers of seniors can spend several hours per week taking care of their elderly parents or relatives. And that’s on top of their own everyday workload and routine.
Many caregivers also pay out of their own pockets for their parents’ necessities like:
- prescription and over-the-counter drugs,
- specialized devices,
- rehab and
- home renovations.
Of course, seniors aren’t the only ones who need care. Perhaps you have a child or a spouse with a disability or special needs. Regardless of the situation, there’s no denying that looking after someone who’s sick or disabled can take up a great deal of your time and money.
But how can you help relieve some of the financial challenges you may face as a caregiver? For starters, tax season is well underway. This gives you the chance to take advantage of all the non-refundable tax credits available for caregivers. Here are a few to keep in mind when you file your taxes.
Non-refundable tax credits for caregivers
What’s a non-refundable tax credit? It’s a credit that reduces your tax bill.
For example, a tax credit of $500 will directly lower your tax bill by $500. (Compare that to a tax deduction, which lowers your income so you pay less tax. How much less depends on your tax bracket.)
It’s important to remember that a non-refundable tax credit will reduce what you owe. But it won’t result in the government paying you money. In other words, if you would have owed $400 in tax, a $500 non-refundable tax credit will knock your bill down to zero, not give you back $100. (That’s the “non-refundable” part.)
These tax credits are meant to help even out the tax burden by allowing some relief for medical and disability costs, since these are extra expenses that most other taxpayers don’t have to shoulder.
Here are four non-refundable tax credits to be aware of as you’re preparing your tax return this year:
1. Medical expense tax credit (METC)
Are you paying out-of-pocket for a loved one’s dentist bills? What about their nursing home care? In such cases, you may be able to find some tax relief through the medical expense tax credit (METC).
What is the METC and how much is it worth? The METC provides a non-refundable tax credit for “qualifying medical expenses.” It can exceed a certain threshold – 3% of net income or $2,397 (2020 threshold, indexed to inflation), whichever is less (provincial thresholds may vary).
In Quebec, the threshold for provincial tax purposes is 3% of both spouses’ combined net income. But in this case, there’s no “whichever is less.” This means there’s no dollar threshold for Quebec’s provincial determinations.
What can you claim as a medical expense? You can claim all eligible medical expenses for which you haven’t been reimbursed by a health insurance plan or in any other way.
You can claim your own expenses, and those of your spouse and children. You can also claim the credit for others who depend on you for support, such as:
- adult children,
- adult grandchildren,
- your parents or
- your spouse’s parents.
For instance, let’s say you took your dependent parent to a dentist who charged $700. You could count the $700 you paid towards a claim for the METC.
Your parents or dependants don’t have to live with you for you get this credit. But they must be Canadian residents who depend on you for financial support throughout the year.
Here’s a look at some of what counts as an eligible medical expense:
- Payments to a health professional (e.g., dentist, nurse, pharmacist, optometrist, psychologist, chiropractor, podiatrist, therapist, dietician)
- Medical services not covered by insurance (e.g., laser eye surgery)
- Medical services outside of Canada
- Health aids or devices (e.g., prescription eyeglasses, wheelchair, hearing aids, crutches)
- Prescription drugs or medications
- Nursing home care (just the cost of nursing care, not the cost for room and board)
- Service animals
- Ambulance fees
- Wigs made for hair loss due to disease treatment
For the full list of medical expenses, see the Canada Revenue Agency’s (CRA) medical expense page. You’ll be able to:
- search for any particular expense and
- find out whether you can count it as a medical expense on your tax return.
- Are you entitled to a tax refund for your medical expenses?
2. Disability tax credit (DTC)
What is the disability tax credit (DTC)? The non-refundable disability tax credit (DTC) lets you reduce your tax bill if you’re taking care of someone who:
- is dependent on you, and
- has an impairment in physical or mental functions that's persisted - or is expected to continue - for at least 12 months
How much is the disability tax credit (DTC) worth? Depending on your province, the DTC is worth between $1,500 and $2,000 of combined federal and provincial tax relief.
Here’s what you need to qualify for the DTC:
- A medical professional* must fill out a form and certify that your care-receiver has a severe and prolonged impairment. This means they must have a condition that has lasted a year at the very least.
- The CRA has to approve this form. Once you get the green light, you can claim the disability amount as a caregiver. Or, you can transfer the credit to your spouse or common-law partner.
*Please note that a medical professional can also state on their form that a person has had a disability for a number of years. This may allow you, or the person with the disability, to claim either DTC or nursing home expenses from previous years.
Thinking of claiming the DTC and claiming your parent’s nursing home care as a medical expense? Someone who depends on you may be able to transfer some or all of the DTC to you. But the CRA has special rules when it comes to claiming both disability and nursing care as medical expenses. In most cases there’s no double dipping. So you’ll have to choose between:
- your relative claiming the DTC and transferring it to you, or
- counting the expense towards a claim for the METC.
3. Home accessibility tax credit (HATC)
Did you have a wheelchair ramp, walk-in bathtub or grip bar built into your home last year? Or maybe you paid to have one installed in your dependent relative’s home? Then make the most of the non-refundable home accessibility tax credit (HATC).
What is the HATC and how much is it worth? Home renovation, addition or alteration. Call it what you want, it’s worth a federal credit of up to $1,500 per calendar year, per individual.
To claim this credit, your renovation must be made to help a senior or person with a disability who’s already approved for the DTC. This means it’s there to make things easier for the care-receiver, whether it’s:
- gaining better access to a home,
- being more mobile within that space or
- reducing the risk of harm or injury.
What counts as an eligible renovation under the HATC?
- grab bars
- hand rails
- walk-in tubs
- wheel-in showers
- widening doorways for wheelchairs
- lowering cabinets
What happens if you take out a loan to cover the renovation? Unfortunately, you can’t claim any interest charged on that loan. The HATC also doesn’t apply to the cost of household appliances, housekeeping or gardening.
Can you claim both HATC and METC? Yes, you can double-dip these credits. This means that wheelchair ramp you had built in counts as a medical expense and a home-accessibility renovation.
4. Canada Caregiver Credit (CCC)
Do you provide food, shelter or clothing for a loved one with a disability, injury or illness, and who depends on you for support? The CRA refers to them as “infirm dependants.” This means the person you’re caring for has some kind of physical or mental condition. And, this condition prevents them from doing basic tasks or providing for themselves. It could be a senior with Alzheimer's disease or a child with a birth defect. Various factors and situations can apply.
You can claim Canada Caregiver Credit (CCC) if you have an infirm dependent. It can be your partner, child, grandchild, parent, sibling or other close relative, so long as:
- they’re dependent on you as a caregiver, and
- you regularly and consistently provide them with some or all of the basic necessities of life.
You can even claim this credit for taking care of non-blood relatives, like your stepchildren or in-laws.
It’s also worth noting that the person receiving your care doesn’t have to live with you for you to qualify for the CCC. What matters is that you’re financially supporting his or her basic needs.
How much is the CCC worth? That depends on your relationship.
Canada Caregiver Credit (2020 amounts)
|The care-receiver's relationship to you||What you can claim on your tax return (federal)|
|Spoouse or common-law partner||up to $7,276 per person|
|Adult dependents (e.g., your parents or adult children age 18 or older)||up to $7,276 per person|
|Dependents under 18 years of age at the end of the year (e.g., your children or grandchildren)||up to $2,273 per person|
|Adult dependents you're not related to||up to $7,276 per person|
Can you share the CCC with someone else? In some cases, more than one caregiver can share the CCC. But you can only claim one CCC amount per care-receiver.
So, let’s say you’re claiming the maximum amount ($7,276) for paying your aging parent’s rent. And you’re sharing this financial responsibility equally with your sibling. Then, in this case, each of you can claim $3,638 on your taxes.
Do you need any special documentation to get the CCC? After you’ve filed your tax return, the CRA might ask you for a signed statement from your doctor. This statement may include details about your relative’s impairment. But they won’t ask for this if they’ve already approved your relative for the DTC.
How much will you save with these tax credits?
There’s a bit of math involved in this. But it depends on how much you’re claiming and the federal and provincial tax rates. In Canada, the federal tax rate currently stands at 15% while the provincial tax rate varies across the nation.
Caregiver tax credit savings by province
|Province||Provincial tax rate|
|Newfoundland and Labrador||8.7%|
|Quebec||15% (see details)|
So let’s say you live in Alberta where the provincial tax rate is 10%. And, you’re claiming an amount of $8,000 for DTC. In this situation, how much are you actually saving with your federal and provincial tax credits? Here’s how it works:
- Add up your federal tax rate (15%) and your provincial tax rate (10%) and you’re looking at a total of 25% in federal/provincial tax.
- Since your combined tax rate is 25%, you would multiply .25 by the amount you’re claiming ($8,000). You’d then find that you’re saving about $2,000. This is the amount you’ll save on your overall tax bill, assuming your tax bill is already over $2,000.
Learn more about what tax credits are available for you
To get a better sense of what you can claim as a caregiver and what lines on the tax form you need to fill out, check out the CRA’s page on credits, deductions and expenses.
You’ll also want to consider working with a tax professional, like an accountant. They can help ensure you’re following the rules and getting the most from these credits.
And be sure to keep all your receipts – you never know when you’ll have to produce them.
Read more about your 2020 taxes:
- Have you been working from home this past year? Here’s a look at what home-office expenses you can claim on your tax return.
- Did you receive CERB payments or other government benefits last year? Here’s how you may be taxed this year and what you can do to reduce your tax bill.
This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.