Canadian Taxation for Seniors – CRA allows seniors to claim a number of tax benefits on their returns.
They are commonly entitled to receive tax benefits for pension income, medical expenses and disabilities.
Old Age Security Pension (OAS)
- The Old age security pension is a monthly payment available to most Canadians aged 65 or older. OAS benefits are based on two factors: age and number of years of residence in Canada.
- From the tax perspective, OAS will be treated as taxable income.
- Similarly, the maximum benefit that can be received is $6,078.87 for the year 2017 & $7,210.2 for the year 2018
- The maximum individual income to receive the OAS is $123,386 for the year 2018
Net Federal Supplement & allowance
- Guaranteed income Supplements (GIS) and Spousal allowances are collectively referred to as Net Federal Supplements.
- Meanwhile, federal supplements will be based on annual income.
- These are not paid outside Canada beyond a period of 6 months.
- Net federal supplements are shown in Box 21 of the T4A (OAS).
- The full amount of benefit is included in income on Line 146 of T1 General to arrive at Total Income.
- Since both of these benefits are non-taxable an equal amount of benefit is claimed as a deduction from net income on Line 250 to arrive at taxable income.
Guaranteed Income Supplement
Similarly, a monthly benefit paid to residents of Canada who receive a basic Old Age Security pension and have little or no other income.
Spouse’s and Widowed Spouse’s allowance
- The Spouse’s Allowance is designed to recognize the difficult circumstances faced by many widowed persons and by couples living on the pension of only one spouse.
- To qualify, an applicant must be between the ages of 60 and 64 and must have lived in Canada for at least 10 years after turning 18.
- The Spouse’s Allowance stops when the recipient becomes eligible for an Old Age Security pension at age 65.
- In addition, the Spouse’s Allowance stops if a widow or widower remarries.
You are allowed to claim a credit if you were 65 or older at the end of the tax year. Your net income on your tax return must also be less than $82,353. The age amount you can claim depends on your income If your income is less than $35,466, you would claim $7,033. If you earn more than $35,466, but less than $80,256, you would claim $6,854 minus 15 percent of the amount by which your income exceeds $35,466. For instance, if your income is $50,000, your age amount would be $4,853.
Pension Income Amount
As people get older, they often stop working, meaning their income may be derived from a public pension plan, such as the Canada Pension Plan, or private pension plan, Larson said. As of publication, you may claim up to $2,000 in credit for the pension income amount if you have eligible pension income. Eligible income may include pension or annuity income you received as payments for a pension or superannuation plan or from payments you receive from an RRSP.
“If you are married or have a common-law partner, you may shift pension income from one partner to another so the family pays lower tax,” Larson said. If you earn a higher income than your spouse, your spouse may have a lower tax rate, and transferring your eligible pension income amounts to your spouse will allow a decrease in the overall tax your family pays, he said. As of publication, you can transfer up to 50 percent of your eligible pension income to your spouse or partner.
Medical expenses are a significant cost for anyone. But as people get older, the need for medical care increases and that portion you pay adds up for medical costs. Larson said people are allowed to claim medical expenses that aren’t reimbursed if they exceed 3 percent of income.
The CRA allows people to claim a wide range of medical expenses — some of them obvious and others, not so much. You may include your prescription medication costs and the amounts you pay to your doctors, for instance. You can also include more obscure medical expenses, such as air conditioning, bathroom aids and book page-turning devices. When you list your medical expenses, you must be able to account for each cost with documentation. “You must keep your receipts,” Larson pointed out.
Other Federal Credits
You may be eligible to receive several other tax credits and benefits depending on your individual situation. For instance, if you are married or have a common-law partner. You may be able to claim the spousal amount if you supported your partner and he has a lower income. You may also elect to have some of your tax credits transferred to your spouse’s tax return or vice versa. Once your tax liability is reduced to $0. You can then transfer any additional tax credits to your spouse to reduce his tax liability.
Disability amount (for yourself)
You must have a physical or mental impairment for a continuous period of at least 12 months to qualify for the disability amount. Examples: blindness, a “markedly restricted” ability to speak, hear, walk, feed or dress, or control bowel or bladder functions.
Complete Form T2201, Disability Tax Credit Certificate.
Have a qualified practitioner sign the form, such as a doctor, optometrist or psychologist, depending on the disability.
Public transit amount
The 2017 federal budget
proposed to eliminate the public transit tax credit after June 2017. For the 2017 tax year, you can only claim the credit for eligible amounts until June 30, 2017.
For eligible credit periods as noted above, you can claim for the full amount you paid for a public transit pass during the year. The public transit amount covers monthly or annual passes for unlimited travel within Canada on local buses, streetcars, subways, commuter trains or buses, and local ferries. You can’t claim day passes, tokens or tickets. You can only claim a monthly or annual transit pass.
Home Accessibility Tax Credit (HATC)
If you are 65 or older and you made changes to your home to improve your quality of life, you may be eligible to receive the Home Accessibility Tax Credit. This is a non- refundable credit tax credit, meaning this credit may only reduce your tax owing. Not itself garners a refund. This credit allows you to claim up to $10,000 in home improvement expenses. Of the expenses you claim, 15 percent of them come back to you as a credit. According to the CRA, among the expenses you can claim are wheelchair ramps; walk-in bathtubs or wheel-in showers; widening of doors.