In the 2017 Federal Budget, Canadian Finance Minister Bill Morneau announced changes that will affect the current infirm dependant credit, the caregiver credit and the family caregiver credit. For tax years 2017 onward, Canadian taxpayers will claim the new ‘Canada Caregiver Credit’ .

The ‘Canada Caregiver Credit’ replaces the above three tax credits, targeting support to individuals who need it the most. The following is an overview of the newly introduced ‘Canada Caregiver Credit’, along with a discussion of what is different in comparison to the existing plans.

 

Caregiver Tax Credits Until 2016

 

Caregiver Credit

Currently, a Canadian taxpayer may be allowed to claim a caregiver credit for each qualifying dependant living in the same house as the taxpayer under the ‘Caregiver Credit’. To qualify, the dependant must have been 18 years of age or older and have income less than the threshold. In this case, the threshold for 2016 is $20,607 ($22,728 if he or she was eligible for the family caregiver amount)

In case of elderly parents, they must be the taxpayer’s or their spouse or common-law partner’s parent or grandparent, age 65 years or over, however, it is not necessary that they have a physical or mental disability (Canada Disability Tax Benefits).
The maximum credit available in 2016 is $4,667 ($6,788 if he or she is eligible for the family caregiver amount

 

Infirm Dependant Credit

If you do not qualify for the caregiver credit (for example, the person does not live with you), you may still qualify for the ‘Infirm Dependent Credit’. This credit may be claimed by Canadian taxpayers who provide support to a qualifying dependant, who has a physical or mental impairment and were age 18 or older, provided the dependant’s net income is less than a certain threshold during the year. For 2016, this threshold was $13,595. A separate credit is available for each dependent.

For purposes of this credit, qualifying dependents would be the taxpayer’s or their spouse’s or common-law partner’s child, grandchild, parent, grandparent, brother, sister, uncle, aunt, nephew, or niece, who was a resident of Canada at any time in the year.

The maximum amount for 2016 that you can claim is $6,788, which includes the family caregiver amount of $2,121 (see below). You may not claim this credit if you are able to claim the caregiver credit discussed above.

 

Family Caregiver Credit

The ‘Family Caregiver Credit’ is a benefit in addition to the Caregiver credit for dependents, who have a physical or mental disability. The credit is available for dependants age 18 or over as well as for those under 18, however, the amounts are reported differently.

For dependents 18 years of age or older, the benefit ($2,121 for 2016) is included in the Infirm Dependant credit or Caregiver credit discussed above.

For dependants under age 18, the benefit ($2,121 for 2016) is reported separately on Schedule 1. The impairment must be prolonged and indefinite and the child must be dependent on you for assistance in attending to personal needs and care when compared to children of the same age.

The CRA may ask for a signed statement from a medical practitioner showing when the impairment began and what the duration of the impairment is expected to be.

2017 Canada Caregiver Credit

The newly introduced Canada Caregiver Tax Credit is available starting in 2017 onward, replacing the three above-mentioned benefits. This tax credit will provide relief to caregivers for dependants who have an infirmity and are therefore dependent on the caregiver for support.

For 2017, the credit amount is:

  • $6,883 for infirm dependants, such as: parents, grandparents, brothers, sisters, or close relatives or;
  • $2,150 for an infirm dependent spouse or common-law partner, an infirm dependant for whom the individual claims an eligible dependant credit, or an infirm child under age 18.

Having said that, it will be reduced dollar-for-dollar by the dependant’s net income above $16,163 (for 2017).

 

Difference between the Canada Caregiver Credit & Existing Plans

  • The dependant does not need to live with the caregiver in order for you to be able to claim the new credit.
  • The benefit from the new credit will be phased out when incomes reach the threshold. The current credits are simply denied once the income reaches the threshold. The new threshold is higher than the current infirm dependant credit but lower than the current caregiver credit.
  • The caregiver credit will no longer be available for non-infirm seniors who live with their adult children.
  • The new credit will extend to cover certain caregivers, who previously did not qualify for these benefits due to the income level of their dependant(s).

 

CRA Example Situations

The CRA while introducing the Canada Caregiver Tax Credit, provided the following situations as examples:

Ann provides care for her sister, Marie, who lives nearby. Marie has chronic pain and cannot work. She receives $14,000 a year in social assistance and has managed to save a little bit over the years. She depends on her sister, Ann, for help with paying her rent, buying groceries and other chores. Ann doesn’t qualify for tax relief under the existing caregiver credits because of Marie’s income. However, under the new Canada Caregiver Credit, Ann will be able to claim $6,883 this year, which represents $1,032 in tax relief.

Another example is of Jayden, who on top of her full-time job, has cared for her husband, Zach, since an accident left him unable to work. Zach receives $15,000 a year under the Canada Pension Plan disability benefit. Due to Zach’s income limits, Jayden currently does not qualify for any caregiver tax benefits, but under the new Canada Caregiver Credit, Jayden will be able to claim $2,150, which represents $323 in tax relief.

Taxpayers should be aware that the benefit amount available under the new Canada Caregiver tax credit is consistent with the benefit amounts that one would have received under the existing caregiver tax credits, such as infirm tax credit, and family caregiver tax credits at 2017 levels.

Many of the other rules will stay the same. For example, only one Canada Caregiver Credit amount will be available on behalf of each infirm dependant, however, the credit can be shared by multiple caregivers who support the same individual, provided that the total claim isn’t higher than the maximum annual amount for that dependant.

 

AG TAX LLP CAN HELP

If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of US and Canadian tax laws as well as cross-border compliance.

Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.

We can assist with:

  • Canadian Personal and corporate tax returns
  • Cross Border Taxation and Business Planning
  • US Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

  • 604-538-8735 (Greater Vancouver Area, BC)
  • 780-702-2732 (Greater Edmonton Area, AB)

 

Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.