Tim Cestnick is president of WaterStreet Family Offices, and author of several tax and personal finance books. tcestnick@waterstreet.ca
I have a number of neighbours who are getting on in years. There's a particular couple whom we like to visit regularly. George's short-term memory isn't what it used to be. He was telling me the other day about a wonderful new golf course that he and his wife visited last fall.
"The course was beautiful, and the green fees were excellent" he told me. "What was the name of the course?" I asked. "Hmm, I can't recall," he said. "What do you call that flower that people like to give on Valentine's Day?"
"You're talking about a rose," I said.
"That's it!" he shouted. "Rose, what's the name of that golf course that we visited last fall?"
It turns out that George forgot to file his tax return last year. So I reminded him that it's almost time to get that done for 2013. Then I shared with him the key deductions and credits that seniors should be thinking about when they file their returns this year. Here's what we talked about.
Age amount
You can claim this credit if you were 65 or older on Dec. 31, 2013, and your net income is less than $80,256. The maximum claim is $6,854 federally. The actual tax savings from this credit would be 15 per cent of $6,854, or $1,028, plus any provincial savings on top.
Pension income amount
This $2,000 credit may be available if you received eligible pension, superannuation or annuity payments. Sorry, but Canada Pension Plan (CPP) income doesn't count as eligible income here.
Pension income splitting
If you qualify to claim the pension income amount I just spoke about, you're generally able to report up to one-half of that pension income on your spouse's tax return, which will save you tax as a couple if your spouse is in a lower tax bracket. A spouse includes a common-law partner under our tax law.
Split CPP income
If you and your spouse are at least 60 years of age, and one or both of you receive CPP benefits, each spouse may be able to apply to split their benefits with the other (i.e., report half on each other's tax returns), which can save tax if one of you is in a lower tax bracket.
CPP contributions
If you're 60 to 70 years of age and employed or self-employed, you have to make CPP or Quebec Pension Plan (QPP) contributions, even if you're receiving CPP or QPP benefits. You can claim a tax credit for these contributions. However, if you're at least 65 but under 70 years of age, you can elect to stop making contributions (use Form CPT30, the applicable part of Schedule 8 to your tax return, or Form RC381, whichever applies).
Medical expenses
You may be eligible to claim a variety of medical expenses, perhaps even previously unclaimed amounts, as long as the expenses were incurred in any 12-month period that ended in 2013. The list of eligible expenses has continued to expand slowly over the past few years. Claim medical expenses on the lower-income spouse's return to maximize your tax relief.
Disability amount
If you have a severe and prolonged physical or mental impairment, you may be eligible to claim $7,697 if a qualified practitioner certifies, on Form T2201 – Disability Tax Credit Certificate, that you meet certain conditions.
Public transit amount
You can claim the cost of monthly (or longer duration) public transit passes for travel on public transit within Canada for 2013. The cost of electronic payment cards can also be claimed when conditions are met.
Work force credits
If you're still working, even part time, you may be eligible to claim the Canada employment amount (maximum $1,117) and the Working income tax benefit (see Schedule 6 of your return).
Registered plans
You're entitled to make contributions to a registered retirement savings plan (RRSP) until the end of the year in which you turn 71. Don't forget to claim a deduction if you've made a contribution for 2013.
And if you're eligible for the disability tax credit it's possible to make contributions to a registered disability savings plan (RDSP) to shelter income on those contributions from tax.
OAS clawbacks
Some seniors must pay back all or a portion of their Old Age Security (OAS) benefits if their income exceeds $70,954 (for 2013). If you're in this boat, examine the types of income you're earning to see if you can change the type of income earned to reduce the impact of these clawbacks going forward.
Tim Cestnick