If you are supporting an adult who is dependent on you because of mental or physical impairment, the Canada Revenue Agency (CRA) offers tax relief on this year’s federal tax return in the form of several, important, non-refundable tax credits.
• Amount for an Infirm Dependant Over 18. (Line 306) If an adult is dependent on you because of an impairment in mental or physical functions, you may be eligible to claim this amount. The dependent adult’s net income — including social assistance and world income — in 2011 must be less than $10,358.
• Caregiver Amount. If the dependant lives with you in your home, you may also be able to claim the Caregiver Amount. The dependant’s net income threshold is higher in this instance than the infirm-dependant amount. The tax credit begins to be clawed back around the $14,600 mark, making this credit accessible to more taxpayers, particularly seniors who are receiving public and private pension benefits.
• Disability Amount. If that adult child is markedly restricted in daily living activities and a medical practitioner completes form T2201 Disability Tax Credit Certificate, you can also claim the Disability Amount — provided the disability is expected to last for a continuous period of 12 months or more. This amount is not income-tested; if the dependant does not have enough taxable income to absorb it, you — as the supporting individual — may claim it.
• Medical expenses. Medical expenses for the dependent adult, too, may be claimed. Note that as of 2011, there is no longer a $10,000 ceiling on the amount of these expenses.
• Child-care costs. Working parents note: you are also eligible for a lucrative tax deduction for infirm adult children who qualify for the Disability Amount. If you incur child-care costs at your expense, you may be able to claim those child-care expenses, up to a maximum of $10,000 a year.
It’s Your Money. Your Life. If you are supporting an infirm adult, claim your tax credit. Or, if you know of a family that is taking care of an infirm adult, pass along this information. Often, these tax preferences assist greatly, especially if the caregiver’s ability to earn is curtailed because of the responsibilities of care. In fact, knowing about these tax opportunities can create important new money for investments such as a Tax-Free Savings Account or RRSP, which can bring further tax-advantaged cash flow into the family.
Next Time: Investing Tips for Young Adults
Evelyn Jacks, president of Knowledge Bureau, is author of Essential Tax Facts 2012 and co-author of Financial Recovery in a Fragile World. To purchase your books, visit www.knowledgebureau.com/Books.asp. Follow Evelyn on Twitter @evelynjacks