By Sheryl Smolkin
Retirement income has to last a long time and stretch to cover the increasing need for care required by disabled or older seniors. That’s why it is important for seniors, their children and their advisors to fully understand and take advantage of available tax exemptions and deductions.
Here are two tax breaks you may not know about.*
1. Disability tax credit (DTC)
The disability amount is a non-refundable tax credit that a person with a severe and prolonged impairment in physical or mental functions can claim to reduce the amount of income tax he/she has to pay in a year. In 2013 the maximum tax credit for people over 18 is $7,697.
To be eligible for the DTC, The Canada Revenue Agency must approve Form T2201, Disability Tax Credit Certificate. You can apply for the DTC at any time during the year. Retroactive payments may be made if the individual was disabled for several years before applying for the tax credit. Last year we got over $9,000 back for my mother.
If you qualified for the disability amount for 2012 and you still meet the eligibility requirements in 2013, you can claim this amount without sending in a new Form T2201. However, you must send one if the previous period of approval ended before 2013, or if requested to do so by CRA.
You may be able to transfer all or part of your disability amount to your spouse or common-law partner or to another supporting person.
If you received attendant care and you are eligible for the DTC, there are special rules that apply for claiming those expenses. For more information, see Attendant care or care in an establishment.
CRA has an interactive online quiz you can take to find out if you or your family member may qualify for the DTC. Also see Who is eligible for the disability tax credit? for all of the requirements that must be met to qualify for the DTC
2. GST/HST for homecare expenses
The goods and services tax (GST) in Saskatchewan (or the harmonized sales tax (HST) in Ontario, Nova Scotia, New Brunswick, and Newfoundland and Labrador) is not payable on publicly subsidized or funded homecare services.**
However, if an individual is not approved for municipal or provincial homecare services, a private agency must charge GST/HST.
Nevertheless, if a government agency approves even a small amount of subsidized homecare services (i.e. 2 hours/week), then ALL public and private homecare services become GST/HST exempt.
That’s why Lorne Lebow, a partner in the accounting firm Stern Cohen LLP recommends that in any situation where an individual requires home care services, an application should be made to the relevant government agency for subsidized or free services before or at the same time a private home care worker is retained.
“Even if a government agency authorizes services for only one or two hours a week, it’s enough to trigger the GST/HST exemption for additional privately-retained home care services. With GST/HST rates ranging from 5% (Saskatchewan) to 15% (Nova Scotia), that can quickly add up,” Lebow says.
He also advises individuals receiving both public and private home care services to inform the agency they are working with and request that invoices do not include GST/HST.
In the event that someone you know has inadvertently paid GST/HST you can apply to the CRA for a rebate going back two years. Saskatchewan residents must send the completed General Application for rebate of GST/HST CRA (Form 189) three-page form with a letter from the government agency confirming the client is receiving subsidized care plus copies of the original invoices to Summerside Tax Centre 275 Pope Road Summerside PE C1N 6A2.
*Also see Guide RC4064, Medical and Disability-Related Information and discuss your family’s situation with your accountant or other financial advisor.
** Effective March 21, 2013 the definition of “homemaker service” in the GST/HST legislation has been expanded to include cleaning, laundering, meal preparation and child care provided to an individual who, due to age, infirmity or disability, requires assistance in his/her home plus personal care services such as bathing, feeding, and assistance with dressing and taking medication.