If you’re in your golden years or taking care of a family member who is, take a minute to review what credits and deductions you could both be eligible for.
Make sure you file a tax return: Always file, because you could be entitled to other credits, deductions and benefits that get triggered by your tax return such as GST/HST credits. If you’re receiving Guaranteed Income Supplement (GIS) through Old Age Security, make sure to file on time to ensure their benefits continue uninterrupted.
Income split and save: You’re allowed to split up to half of your eligible pension income with a spouse or common-law partner. Income splitting allows some seniors to enjoy a significant tax reduction. In the situation where the lower-income spouse has very little income, the tax savings are substantial. If your spouse is unable to completely offset his or her age amount, pension income and disability amount against tax payable, he or she may transfer the unused portion to your return.
Split your CPP and save: You may be able to split part of your CPP retirement benefits with your spouse depending on how long you lived together when you were contributing to the plan. This is an advantage if one senior is in a higher tax bracket than the other. However, to do so, you must apply to Human Resources & Social Development Canada using Form ISP-1002. It cannot be done at the time of tax preparation.
Double check how foreign pension income is taxed: Pensions from foreign countries may be subject to special tax treatment under the terms of a tax treaty. Always check with a tax professional to find out if the pension you receive from a foreign source is taxable in Canada.
Medical expenses can add up: A portion of most medical expenses can be claimed! Everything from medication to nursing home fees, and even medical insurance for a trip or wintering in another country is considered eligible. Medical expenses are calculated based on income so it is normally more beneficial for the lower income spouse to claim them. And if you had to travel to obtain medical treatment that was not available where you live, you may be able to claim the cost of transportation, meals and accommodation.
Taking care of a senior has its tax benefits: If you are over 65 and dependent on your children or other family members because of an impairment in physical or medical functions, they may be able to claim the Canada Caregiver Tax Credit. To qualify for the tax credit, your earnings need to be less than $23,046 in 2017 and a doctor needs to supply a note explaining the nature and duration of the impairment. If you are eligible for the disability tax credit, they may also be able to claim any portion that you do not need to reduce your taxes to zero.