Many families looking after elderly relatives right now could also be strained financially as they provide necessities and take time to care for those who need help. Kim Parlee talks to Georgia Swan, a tax and estate advisor with TD Wealth, about what tax credit options may be available to relieve the financial stress and how you qualify for them.
Georgia Swan is a Tax and Estate Planner at TD Wealth. She joins us from Barrie, Ontario, for this Ask MoneyTalk. Georgia, the question is, "I have a parent with dementia who I am caring for at home. Are there tax credits that I may be eligible for?"
- There are. There's actually what's known as basically the caregiver tax credit. And it represents a very real amount of savings to a lot of people who are in this position. So it changes from year to year, but for example, for 2020, it's $7,276.
The thing is, though, that it is clawed back, or it's basically reduced, dollar for dollar, for every dollar that the dependent person has an income over $17,085. So you do have to be careful. But where it's possible to get it, I think it's something that everybody should really look into.
- And can you just give some qualification maybe for what is considered a dependent, I guess, in terms of what kinds of things you're providing?
- So first and foremost, both you and the person that you're caring for have to be resident in Canada. And it's available if you're caring for a spouse or common-law partner or the parent of-- your parent, your spouse's parent, your common-law partner's parent, a child, an aunt, an uncle, a grandparent, a niece, a nephew. So there's all sorts of different family members that, if you are caring for them, you could qualify for the credit. And the idea is that you have to consistently provide basically the necessities of life for this person-- so their food, shelter, clothing, helping them dress, cooking for them-- basically, whatever they need in their day-to-day care, and that this is a consistent contribution that you have to that person's life.
- Are there any things to watch out for when you are claiming this?
- Absolutely. First, the Canada Revenue Agency may require, if you're going to claim this, a note from the doctor basically outlining what the condition is that the person has, what the duration is, what kind of care that they need. Also, in certain cases, if the person is a minor child that you're caring for, then the doctor's note may have to also include what the child's condition is and a statement that this particular child does require more care than what another child who doesn't have this condition would require.
Also, if you also claim the credit for a dependent spouse, then the caregiver credit might be reduced to about $2,431 from that high of over $7,000. But whatever it is, it can represent a savings to your taxes from about $341 to just over $1,000. So, for a lot of people that are in this situation, that represents a real amount of money in their pocket at the end of the day.
- I'm assuming this-- and we used the example of someone having a parent with dementia and taking them out of a long-term care home and bringing them into their own home. So does it only apply if you take in the person and they're living with you?
- No. That's what's great about it. Even if they don't live with you, if you still provide the necessities of life, that consistent care, they could be living in their own home-- or, for example, if it's a parent, in your brother's home or your sister's home. And so that's actually a very important component of it.
And as well, actually, if you are sharing those duties with someone, for example, with a brother or a sister or another sibling, you can share that credit only-- per dependent person, there is only one credit. So that $7,000, they can only have one of those. But having said that, if I share those duties with my sister and we share it 50% of the time-- for example, one day, she goes to my mother's house and cares for her, and the next day, I go-- then we can actually split that credit according to the amount of our respective time contribution that we have.
- Interesting. Georgia, great insight, as always. Thank you.
- Thank you.
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