Strategies such as income-splitting and deferring taxes via an RRSP are just some of the tax-effective routes available to help your clients achieve future financial security. However, for eligible senior-aged clients, taking advantage of provincial and federal government tax credits and grants are ways to continue reducing their taxes or to receive a government cheque.
“Many of the credits are income-based and are part of our social safety net as Canadians,” says Les Wolfe, a certified public accountant and chartered accountant in Dundas, Ont. “So, if you meet the criteria set out, you may be eligible to receive them. The important thing to know about these credits is that everyone, especially seniors with their lower incomes, should file a tax return even if they think they are not going to be paying any taxes. Credits are only given to those who file a [tax] return; otherwise, they miss out.”
The tax credits are either refundable or non-refundable. Non-refundable credits primarily are from the federal government and are deductions to lower overall taxes. For example, everyone gets the personal exemption, but if your clients are 65 years old or older with net income of less than $78,684 in 2012, they can claim a certain amount based on a sliding scale. There also are corresponding provincial non-refundable tax credits.
Although public transit tax and disability credits – including tax credits for caregivers – are available to anyone, elderly clients usually can take greater advantage of them because their incomes generally are lower.
“Having said that,” Wolfe says, “if [your client’s] tax credits end up in a minus situation, it doesn’t mean they will get a refund. That’s why they call it a ‘non-refundable’ tax credit. These non-refundable tax credits reduce the amount of income on which you have to pay taxes levied.”
An important fact for seniors is that if some non-refundable amounts are not fully used or needed, a portion of these deductions can be transferred to the taxpayer’s spouse or common-law partner to reduce the spouse’s taxes. These include deductions for the age, disability and income amounts.
Each province has its own set of credits, and many of these are refundable – that is, if the credit is higher than the taxes owed, the difference is received as a refund. This applies, for example, to the GST/HST credit. Although this credit is available to all Canadians, it generally pertains to seniors because of their low income levels. Once someone is over the income threshold, the credit is no longer valid. Eligible individuals must apply for the credit every year and file an income tax return even if there is no income to report.
@page_break@There also are other interesting tax credits available, such the Ontario trillium benefit, which combines three credits: the Ontario sales tax credit; the Ontario energy and property tax credit; and the northern Ontario energy credit. “Each has its own criteria,” Wolfe says, “but they are bundled into one payment or series of payments, depending on the situation.”
These tax credits, while extremely helpful for senior clients, are available to all taxpayers. Of interest to senior clients, then, are those credits that are specifically for them, such as the Ontario seniors homeowners property tax grant, which is available to taxpayers who are 64 years old and older and own their home.
Eligible taxpayers may qualify to receive a maximum of $500 to help pay property taxes. Ontario residents must submit proof of their property taxes on their income tax form. The resulting credit, once again, will depend on income.
Also available in Ontario is the healthy homes renovation tax credit, which is meant to help seniors make their homes safer and more accessible. The province says this particular credit is not based on income and is open to those 65 and older or living with a family member who is a senior.
Those who qualify can claim 15%, up to a maximum $10,000, of the cost of eligible home improvements on their tax return. A client living with a senior in the client’s home may qualify for a total tax credit of up to $1,500 every year, regardless of income.
British Columbia has a similar credit, called the seniors’ home renovation tax credit. It relates to renovations made after April 1, 2012, and is payable to the senior or family member living with a senior. In this case, the credit – a maximum of $1,000 a year – can be shared among eligible residents of the home.
Quebec offers a refundable tax credit for home-support services for seniors. Eligible services include personal-care services related to the senior’s well-being and home maintenance, such as housekeeping, laundry and minor maintenance work outside the home. The size of the credit depends on whether the senior is a dependent of another taxpayer.
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