Maximizing Tax Benefits for Your Aging Parents
Whether you are actively involved in the care of your aging parents or simply assisting them with their tax returns for elderly parents, it’s essential to keep certain tips in mind to ensure both of you receive the maximum benefits when filing your 2023 returns.
Maximizing tax returns for elderly parents
- Ensure They File a Return: Regardless of the amount of income your parent earned, it is crucial for them to file a return. By doing so, they can claim the basic personal amount and potentially qualify for additional credits and benefits. Filing a return is also necessary to determine eligibility for federal and provincial benefits like the Guaranteed Income Supplement (GIS) and the GST/HST Credit.
- Split Pension Income: Seniors have the option to split up to half of their eligible pension income with their spouse or common-law partner. This can lead to a significant reduction in taxes, especially when one spouse has minimal income compared to the other. However, certain pension payments, such as OAS, CPP/QPP, and tax-exempt foreign pensions, cannot be split.
- Claim Medical Expenses: Encourage your parent to keep track of their medical expenses throughout the year. They can claim eligible expenses, including travel medical insurance, prescriptions, eyeglasses, and dental care, to lower their tax liability. If you financially support your parent and cover their medical expenses, you might be able to claim those expenses on your own tax return.
- Claim Tax Credits for Disability: If your parent has a disability, they may qualify for additional tax credits. The federal disability tax credit can reduce the amount of tax owed, provided they have an approved disability tax credit certificate (form T2201). Unused portions of the credit can be transferred to a spouse or to you if you provide support. Provincial/territorial disability tax credits may also be available.
- Utilize Tax Credits for Caregivers: If your parent depends on you due to a mental or physical impairment, you may be eligible to claim the Canada caregiver amount (or the Québec tax credit for caregivers, if applicable). If your parent’s spouse is dependent on them, they can claim the credit as their spouse’s caregiver. These credits offer relief for the financial burden of caregiving.
- Explore Provincial/Territorial Credits: Each province or territory in Canada offers specific credits and deductions for seniors. Examples include the Ontario seniors’ public transit tax credit, designed to assist with public transit costs, and the Québec tax credits for seniors’ activities and home-support services. Familiarize yourself with the available credits in your parent’s province or territory.
By keeping these tips in mind and leveraging the expertise of tax professionals, you can help your aging parents maximize their tax benefits and ensure a successful filing for the 2020 tax year.