Finding out about Alzheimer’s disease and taxes in Muskoka

Question: Are there any tax savings I can benefit from while caring for someone with Alzheimer’s Disease (AD)?

The good news is that our tax system contains a number of breaks for individuals with disabilities or impairments. There are non-refundable tax credits available to you as a caregiver. These potential credits are worth taking a closer look at. By trying to reduce the federal and provincial income taxes payable, the pressure caused by the costs of providing care may be reduced.

The bad news is that it takes some skill to sort out the overlapping rules to determine who can apply for these special tax provisions, and I am far from being an expert on this topic.

Nevertheless, here are some of the tax credits you and your tax adviser may consider:

How Personal Tax Credits Work

Individual taxpayers in Canada are entitled to claim certain personal non-refundable income tax credits. Each type of tax credit has a certain "amount" associated with it. The total of all tax credit "amounts" an individual is entitled to claim is then multiplied by 20.05 per cent, and this product is deducted from the amount of income tax otherwise payable by the individual. If the amount of non-refundable tax credits is greater than the amount of tax owing, the excess is "lost" to the individual unless they can be transferred to another eligible taxpayer.

Disability Tax Credit

This credit is claimed by an individual who meets the criteria of being “disabled” as provided in the Income Tax Act. If the individual with AD does not have sufficient income to benefit from the disability credit, the unused portion of the credit may be claimed by the individual’s spouse, or a relative on whom the individual is dependent. The disability credit amount is $8,586 for the 2020 tax year.

NOTE: A tax form T2201 (Disability Tax Credit information) must be completed by a physician who has examined the individual, and this form must be filed with the first tax return on which the disability credit is being claimed. Therefore, the first tax return on which the disability credit is being claimed generally cannot be filed electronically (it must be paper-filed).

The Canada Caregiver Tax Credit

Introduced in 2017, the Canada Caregiver Tax Credit is a consolidated credit that will combine the previous infirm dependant, caregiver, and family caregiver tax credits. As a caregiver caring for a disabled relative who is dependent on you, you may be eligible for the Canada Caregiver Tax Credit (CCC) if at any time during the year you maintained a dwelling where both you and the disabled dependent live. The maximum CCC amount is $7,276 for 2020, but this may be reduced if the disabled dependant earned more than $17,085 during the year. In cases where an individual claims the spouse or common-law partner amount or the amount for an eligible dependant on an infirm individual, the lower amount of $2,273 for 2020 will be added to this amount (formerly the caregiver amount). In cases where the result is less than the $7,276 maximum amount, there will be a top-up amount to bring the credit up to the maximum CCC credit. If you and another person support the same dependent, you may split the claim between you (Though some rules apply). No credit is available in respect of non-infirm individuals over the age of 65 that reside with an adult child.

Medical Expense Tax Credit

Qualifying medical expenses that were paid for yourself, your spouse and your minor children during any 12 consecutive month period ending in the taxation year are eligible for a tax credit. You may also be able to claim medical expenses paid in respect to adult children, grandchildren, parents etc., who are dependent on you. You may choose any 12-month period ending in the year that maximizes the amount of your medical expense claim (provided you haven’t already claimed these expenses on a previous tax return). In the year a person dies, you may claim medical expenses for a 24-consecutive-month period proceeding the date of death. Only medical expenses in excess of $2,397 or 3 per cent of your net income (whichever is less) can be claimed. Examples of expenses that may qualify for the medical credit include: prescriptions, eyeglasses, medical practitioner fees (doctor, dentist, optometrist, surgeon, registered therapist etc.), lab or diagnostic fees, medical equipment (wheelchairs etc.,), attendant care, nursing home fees, long-term care, travel to obtain medical services, and ambulance fees. In some cases there are restrictions on your ability to claim these expenses. You cannot claim any portion of expenses that are reimbursed to you or paid by another party (I.E. a medical insurance plan). Please note that it is essential to keep careful records of all medical expenses.

Ontario Property and Sales Tax Credits — Involuntary Separation

Unfortunately, spouses often become involuntarily separated for medical reasons for ex., when the individual with dementia must reside in a long-term care (LTC) facility. In this instance, each spouse may separately claim the Ontario property and sales tax credit. Rent or fees paid to a care facility may or may not qualify for the Ontario property tax credit. Generally, where the LTC facility is subsidized or exempt from property tax, you can’t consider any portion of the LTC fees for the property tax credit. The administrator of the home will be able to advise whether any portion of the fees paid will qualify for the property tax credit.

If you neglected to claim any of the above credits in a previous tax year but may have been entitled to do so, you are able to request that the government adjust your previous returns to include these credits using a T1 Adjustment Request form. You have three years from the date a return is assessed during which you can request an adjustment to that return. After the three-year period has passed, they will generally not allow a return to be changed, although in some cases they will permit adjustments to returns going back as far as 10 years.

If you would like a copy of the Disability Tax Credit Certificate from Canada Revenue Agency, or would like a package prepared by Ken Garth, BDO Canada LLP on Income Tax Information for Families of Alzheimer’s Patients for 2019 Income Tax year, they may be picked up at the Alzheimer Society of Muskoka office.

Please note that the tax information provided herein may not consider all possible complications that may apply to your particular circumstances and should be considered as general advice only. For more information on non-refundable tax credits or tax planning for family caregivers, please contact your tax adviser for individual advice.

Karen Quemby is the executive director for the Alzheimer Society of Muskoka.