With the favourable changes to the Income Tax Act over the last few years, individuals with a disability and their supporting family members should review their tax filings, current and past, to ensure that all eligible tax credits and deductions are being claimed. As most credits are non-refundable (meaning you must have paid enough in taxes to claim the full credit), certain unused credits may be transferred to supporting family members to reduce their tax bill. Remember, you may be eligible to claim these unused credits, retroactively, in any of the previous 10 years.
What’s new for Caregivers in 2012
Beginning in 2012, an enhancement credit, the family caregiver tax credit, will be available to a family member supporting an individual with a physical or mental infirmity. This credit is on top of the current support credits available, and may be claimed on behalf of a spouse or minor child with physical or mental infirmities.
Caregiver Tax Tip for Families
If you have a family member with either a mental or physical infirmity that requires attendant care, consider paying another family member to care for this individual. The amount you pay may be claimed as an eligible medical expense. For example, you may pay one parent to care for the other parent and claim the amount paid as an eligible medical expense.
Taxes and Future Planning
If you have not done so, make sure you have a will. Proper estate planning now will minimize your taxes later. Remember to review your will periodically and update it to take advantage of current tax legislation. There is no estate tax per se in Canada, but individuals are taxed on their accumulated gains upon death. Depending on your wishes, it may be advisable to gift some of your assets to your beneficiaries prior to your passing. There is no gift tax in Canada, and the only tax you may pay as a result of the gift is on the gain on the value of property you are gifting (if you gift an asset that has not increased in value i.e. a GIC, you will not incur tax). Your beneficiaries will benefit from your gift now, and any income they may earn from your gift will be taxed in their hands, not yours. By gifting now, you can also avoid potential conflict between beneficiaries later.
Ability Tax Group LLP