Tax Savings for Seniors
By Nizam Shajani, CPA, CA, MBA
If you are a senior, you are eligible for several tax credits that should be considered when filing your personal tax return. Use the wisdom that comes with age and take advantage of the benefits.
Age Amount Credit
If you are over the age of 65 on December 31st and your income is less than $89,421 in 2020 ($87,750 in 2019), you are eligible for an Age Amount Credit. The credit is $7,637 for income less than $36,976 and the credit decreases by 15% for the amount your income exceeds $38,508 and is clawed back completely when your income reaches $89,421. There may be corresponding provincial non-refundable credits also available.
You may be able to transfer all or part of your age amount to your spouse.
Pension Income Amount Credit
If you are receiving eligible pension income, you can claim up to $2,000 of the Pension Income Amount Credit. This may include pension or annuity income received for a pension or superannuation plan or payments from your RRSP.
Pension Income Splitting.
A joint election can be made for Pension Income Splitting. This can be done between married or common law partners, who are residents of Canada and the pension recipient is receiving qualified pension income. You are not prevented from splitting your eligible pension income because of the age of your spouse or common law partner. This can provide significant tax savings by utilizing each spouse’s bottom tax brackets.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit allows a claim of up to $10,000 for all seniors who made changes to their home to improve their quality of life. Expenses that can be claimed include improvements to accessibility such as widening of doors, non-slip flooring, wheelchair ramps, walk-in tubs, motion sensor lights etc. Relatives who support a related senior may also be eligible for this credit.
Medical Expenses are often high for seniors. You may claim medical expenses that exceed 3% of income.
Disability Tax Credit
If you get to the point where you have a physical or mental impairment that impacts the basic activities of your daily living that is anticipated to last more than twelve consecutive months – you may qualify for the Disability Tax Credit. A T2201 form must be certified by medical professional and provided to CRA as part of an application. You may be able to claim back as far as ten previous years if that is when the disability occurred.
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This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP