While billions of dollars are spent every year by Canadians who are caring for ailing family members, more than 85 per cent of them are leaving money on the table in possible tax breaks that could ease the financial burden for caregivers.
One-third of Canadians currently provide care-giving support or expect to in the next five years – a number that increases to 40 per cent among those aged 45 to 55, according to a recent Canadian Imperial Bank of Commerce poll released on Wednesday. Yet, despite several tax credits available for those Canadians who financially contribute to the care of a loved one due to illness or advanced age, 43 per cent of caregivers stated they are not aware they exist, and only 12 per cent have ever used them.
The low percentage of Canadians utilizing available tax credits is a surprising number that shows there is a greater need for education around what is available to caregivers, says Jamie Golombek, managing director of tax and estate planning at CIBC.
“From a tax perspective, it is very surprising that only 12 per cent have used the credits, and it really makes you wonder why,” Mr. Golombek said in an interview with The Globe and Mail. “Are caregivers just not getting the information directly? Is there a lack of financial literacy? As well, there could be some caregivers who may feel the tax credits are too complicated or not worthwhile. Hopefully, a conversation can be generated among Canadians to at least look into these credits.”
The costs of caring for an aging parent alone is estimated at $33-billion annually in direct and indirect costs, which can range from parking fees to personal-care workers to reduced hours at work, according to CIBC. That figure is expected to jump by 20 per cent over the next decade because of an aging population and increased demand for services.
“Providing care for someone you love can be a rewarding experience, but it can be costly and lead to a family dispute about how the work and costs should be shared,” Mr. Golombek said.
Today, Canadians who financially contribute to the care of a loved one – which in addition to aging parents may also include a spouse, child, grandparent or aunt or uncle – are out of pocket $430 a month on average. Three-quarters of those caregivers admit they are making financial sacrifices as a result of their caregiving responsibility including cutting back on expenses, dipping into personal savings and saving less.
Several tax credits should be considered to help offset the financial costs of care and include:
Credit for caregivers
The Canada caregiver credit (CCC) was introduced in 2017 and consolidated three previous tax credits that were available for those caring for a family member. These included the infirm dependant credit, the caregiver credit and the family-caregiver credit. The new CCC has been simplified and could extend tax relief to some caregivers who may not have qualified in the past. If you provide support to certain family members with a physical or mental infirmity, you may qualify for tax assistance. The basic CCC amount is a maximum of $6,986, on which you can claim a 15-per-cent non-refundable federal tax credit. In some instances, the credit can be shared by multiple caregivers who support the same individual. Eligible family members include caring for your spouse, common-law partner, child, parent, grandparent, grandchild, sibling or aunt and uncle.
Disability tax credit
Depending on which province or territory you live in, the non-refundable disability tax credit (DTC) is worth between $1,500 and $2,700 of combined federal and provincial tax relief for an individual with a severe and prolonged physical or mental disability. To qualify, your impairment must be prolonged, meaning it has lasted or expected to last at least 12 months and a medical doctor or specialist will have to provide documentation that you meet the criteria. It may be possible to transfer the DTC to a supporting individual.
Home-accessibility tax credit
The non-refundable home-accessibility tax credit (HATC) is worth up to $1,500 per calendar year, per qualifying individual to complete renovations required to accommodate your needs. The renovation must allow you to gain greater access or increased mobility within your home, or a relative’s home if you live there. Examples include wheelchair ramps, walk-in bathtub or showers, or grip bars. Renovations can be made for someone who is either at least 65 years of age, or eligible for the DTC.
Medical-expense tax credit
Out-of-pocket medical expenses could be eligible for the medical-expense tax credit (METC). In most cases, this is a non-refundable tax credit. You can claim the METC for your expenses or a qualified family member can claim the tax credit if you depend on them for support. The METC is allowed for expenses that exceed the lower of $2,302, or 3 per cent of one’s net income. Hiring an attendant for care may be eligible for the METC in some circumstances.