Caregivers of Parents and Tax Deductible Expenses

January 2024

Introduction

Do you have aging parents who are need help, physically or financially, to look after themselves? Are you caring for them (i.e. are you a caregiver)? Will you or your parents be faced with the costs of nursing care, home renovations, and other medical needs? Monthly nursing home costs or full-time in-home care can easily escalate to tens of thousands of dollars per year, along with other medical and caregiving costs. When dealing with expenditures of this magnitude, you should know which costs are deductible for tax purposes, not only for your parents but also for you. Remember, you can to back 10 years to correct errors and omissions (although some of the tax credits differed before 2017).  If you are reading this article on my website, you can obtain more details by clicking on the linked headings and phrases.  Warning: This is a complex article – one read through will not do it.

Tax credits available to your parents

The purpose of this article is to review the tax credits available to you as a child supporting your parents. Many of the same credits are available for other family members but that is not the topic here.  For more information on what medical and disability credits are available, see the Canada Revenue Agency (CRA) publications RC4065, Medical Expenses and RC4064 Disability-Related Information.  Review the CRA website to see common tax benefits, deductions and credits available to seniors.  If you live in PEI, you may also like my article on Long-term Care Financial Assistance in PEI.

Tax credits available to you for taking care of your parents

If you are caring for your parent(s), even if they are not living with you, there are a number of credits that you may be able to claim on your tax return. These may include the Canada Caregiver Credit for an infirm parent, a transfer of your parent’s unused Disability tax credit, an Eligible dependant credit if they live with you, medical expenses you must pay on their behalf, or home accessibility (renovation) expenses. There are distinct criteria for eligibility to claim these credits, one of which is that your parent must be dependent on you, i.e., you must support your parent. I will review the federal credits and income thresholds here. In certain cases, there are corresponding provincial credits, but the amounts, thresholds and conditions to be eligible may differ.

Before you start, consider the answers to these questions:

1. Is your parent living with you?
2. Is your parent infirm or disabled?
3. Is your parent dependent on you to provide them with the basic necessities of life, such as food, shelter, and clothing, either physically or financially?
4. What amount of net income does your parent have on their tax return on line 23600?
5. Is anyone else in your family or living in your household claiming the same credit for your parent or someone else in the household?

The following table lists credits that may be available to you as a supporting person, some directly to you or some that can be transferred from your parent if they do not need them.

For some credits, the parent need not be living with you, but they still must be supported by you, which is often difficult to establish if they have their own residence.  See the discussion below.

The “amount” of the claims discussed are not your actual tax savings.  Typically, these amounts are multiplied by the lowest income tax rate, which is 15% for federal credits, to determine your tax savings.  Where a province has a similar credit, that province’s low tax rate will apply to the amount of the provincial claim.

Do you support your parents (i.e., are they dependent on you)?

You likely support your parents in many ways, but do you qualify based on CRA’s criteria? CRA has published the following comment in their online tax folio, S1-F4- C1, Basic Personal and Dependant Tax Credits:

1.19 Whether an individual supports another individual is a question of fact. A person is generally dependent for support on an individual if the individual has actually supplied necessary maintenance, or the basic necessities of life to the person on a regular and consistent basis. The basic necessities of life are generally understood to include food, shelter and clothing.

The following two paragraphs of guidance were extracted from other interpretations published by the CRA, particularly the cancelled Interpretation Bulletin IT-513.

Generally, a person will be dependent for support on an individual if the individual has actually supplied necessary maintenance, or the necessities of life, to the person on a regular and consistent basis. For example, when an elderly parent who is not wholly self-supporting because of mental or physical infirmity lives with a married child, and the child provides the necessary food, lodging, clothing, medical care, etc., the parent may qualify as a dependant of that child.

In general terms, support involves the provision of the basic necessities of life such as food, shelter, and clothing. A person may be confined to a hospital for all or substantially all of the year because of mental or physical infirmity and the cost of hospitalization is paid by a provincial government. The latter fact, in itself, does not necessarily mean that the person was not supported by an individual. If expenses such as clothing, comforts, and medical premiums were paid by the individual (e.g. child) on those occasions when the dependant (e.g. parent) was able to be out of hospital, then, ordinarily, it is recognized that the individual supported that person.

CRA also states in paragraph 2.31 of folio S1-F1-C2, Disability Tax Credit:

Where the eligible person with a disability was in receipt of social assistance or any other type of financial or non-financial support, the supporting individual must be able to show that the other assistance was insufficient to fully meet the basic needs of the eligible person with a disability and that the person had to rely on the additional support provided by the supporting individual.

In Technical Interpretation 2010-0381211I7, CRA clarifies that support must deal with provision of the basic necessities of life such as food, shelter and clothing, which can be financial or non-financial.  They state, “financial support” would involve money to acquire the basic necessities and the term “non-financial support” would refer to directly providing such things as shelter, clothing and food.  The nature and degree of the actions or contributions in each case will determine whether they constitute “support” of another person. Paying certain expenses occasionally will not make the person a dependant; regular assistance would be required.  They state that support does not include “visiting the dependent each day, providing moral support, preparing a meal and doing the person’s laundry and/or shopping.”  Therefore, such actions would not entitle an individual to receive, for example, a transfer of the disability tax credit from the person they are helping.

The most common amounts you may be able to claim for your parent are discussed below. The same credits are often available other dependants also, but this article is about your parents. The key characteristics are summarized in the table above. Amounts that can be claimed are normally subject to income thresholds over which tax savings are reduced or eliminated.

1. Amount for an eligible dependant  (line 30400) 

This is the credit that is most frequently used by single parents supporting a child, but the rules are the same for parents.  To be eligible to claim the eligible dependant amount for providing care for a parent, all of the following criteria must be met:

• • you do not have a spouse or common law partner,
  • you maintain a dwelling in which you and your parent ordinarily reside, and
  • you support this person as a dependant.

For this credit, your parent’s income must be below a prescribed limit, which will be adjusted each year. In 2023, for most taxpayers, the maximum claim for the parent is $15,000 (for 2024, it will be $15,705) and will be reduced dollar for dollar by your parent’s net income on his or her tax return.  For those in the highest federal tax bracket of 33%, the maximum claim is lowered to $13,520 (2024 – $14,156).

Only one claim per household is allowed make a claim for this credit, even if there is more than one dependant and even if other household members are not related.

2. Canada Caregiver Credit  (Line 30450)

If at any time during the year, if your parent was dependent on you because of an impairment in mental or physical functions, you may be able to claim the federal “Canada Caregiver Credit.  Only one Canada Caregiver Credit can be claimed for the same dependant, but that credit can be shared by more than one caregiver as long as the maximum limit is not exceeded.

Certain provinces have their own caregiver credit, and, for some, your parents may not need to be infirm.  For example, the P.E.I. caregiver amount for 2023 excludes the impairment requirement for your parent or grandparent if they were age 65 or older. However, for this PEI credit, the parent must be living in the same household.

The CRA may ask for a signed statement from a medical practitioner showing when the impairment began and how long it is expected to last. If your parent has a disability certificate, this will suffice; however, the conditions needed to get a disability certificate are more onerous than getting a letter.  Your parent’s need for assistance due to mental or physical issues must be set out by your medical practitioner. Your parent does not need to live with you.  My experience is that this dependency requirement is difficult to satisfy if the parent is not living with you and you are not paying for their expenses.  However, if they had lived with you for part of the year, and then moved out, there is a better likelihood of having a claim because of the dependency while they were in your home.

For this claim, your parent’s income must be below a prescribed limit, which will be adjusted each year. In 2023, the maximum claim for the parent is $7,999 (2024 – $8,375). It will be reduced dollar for dollar after your parent’s net income on their tax return exceeds $18,783 (2024 – $19,666).  This means your parent’s income will need to be less than $26,782 in 2023 (2024 – $28,041).

If the Amount for an eligible dependant is being claimed for the same parent, the calculation differs. In that case, there is a multi-part calculation:

• You calculate the eligible dependant amount, which is $13,520 in 2023 if you are in the highest federal tax bracket or $15,000 otherwise ($14,156 and $15,705, respectively, in 2024 tax returns);
• To this base amount, you add $2,499 in 2023 ($2,616 in 2024) for the infirmity;
• You now subtract the parent’s net income and reach a subtotal figure;
• If the subtotal amount you just calculated above is less than $7,999 in 2023 ($8,375 in 2024), then you can claim $7,999; otherwise, claim the higher amount.

3. Disability amount transferred from a dependant  (Line 31800)

If your parent has a Disability tax credit, and is unable to use it all themselves, then it can be transferred to a supporting person.  A Disability tax credit is available to a person with a severe and prolonged impairment in physical or mental functions that results in marked restrictions in performing normal activities of daily living. It is obtained by requesting a medical practitioner to complete Form T2201, Disability Tax Credit Certificate.  This form is then sent to CRA for approval, after which the individual is entitled to the credit for the period of time specified by the CRA.  If your parent has physical or mental impairment, please see the Canada Revenue Agency publication,  RC4064 “Disability-Related Information.”  Contact CRA, your tax preparer or your doctor with questions.  I recommend that you do not respond to promotional ads from companies who will take a portion of your entitlement for something that is usually a simple process.

To be eligible to claim a transfer of all or part of your parent’s disability amount of $9,428 in 2023 (2024 – $9,872), he or she must have lived in Canada at any time during the year and have been dependent on you because of mental or physical impairment.

While not necessarily living with you, you must be able to show that there was a dependency relationship as described earlier.   The amount, if any, of the disability credit transfer depends on your parent’s income because the credit must first be used by your parent to eliminate their own taxes. Only the balance is transferable.  The amount transferred can be shared by more than one supporting person.  If your dependant is claiming attendant care costs as a medical expense, there are limits imposed on using the disability tax credit.  Attendant care costs are described below.  If attendant care costs are claimed, you may not be able to transfer the disability tax credit.  For example, a person may claim up to $10,000 of attendant care expenses and the disability tax credit.  However, if a person claims over $10,000 of attendant care expenses, then no disability tax credit may be claimed, and it would not be transferable.

Generally, you would qualify for the disability tax credit transfer if you either:

• would qualify for the Eligible Dependant Amount, determined hypothetically as if you had not been married or living common-law and as if your dependent parent had no income, or
• would qualify for the Canada Caregiver Credit if your dependant had no income.

4. Medical expenses paid on a dependant’s behalf (line 33199)

You are eligible to claim medical expenses paid for a parent who lived in Canada at any time in the year and depended on you for support. They need not live with you but you must be able to prove dependency, as described earlier. You must have paid the medical expense yourself, and it is the date of payment that determines when it is eligible to claim. For you, your life partner and your minor children, the total medical expenses must exceed the lesser of an annual threshold amount (e.g., federally $2,635 in 2023 and $2,759 in 2024) and 3% of your net income before you can claim them.  Provincial thresholds differ (usually lower, such as $1,678 in PEI for 2023).

To claim medical expenses for your parents, the rules are a little different. First, it is only the amount in excess of 3% of your parent’s net income that you can claim, and you must have paid them. This is the same rule as for your children age 18 or over. The same expenses apply here as for your own medical. There is an extensive list contained in the Canada Revenue Agency publications RC4065, Medical Expenses and their Income Tax Folio S1-F1-C1 Medical Expense Tax Credit. You may also wish to refer to my publication Medical Expenses and Taxes – What can You Claim? which attempts to summarize the rules in a more simplified fashion.  There are many expenses often overlooked.  Be sure to claim travel costs, including mileage for travel of 40 kilometers or more in one direction, and mileage, accommodations, meals (a prescribed flat amount is available per meal), and other travel costs if over 80 kilometers.  Also, the cost of incontinence supplies, compression socks, breast prostheses, hearing aids and batteries, travel health insurance are examples of common oversights.

Home renovations may be medical costs

Certain home renovations are eligible as medical expenses for persons with mobility issues, severe respiratory conditions, and functional issues.  Examples (when needed health wise) include driveway access, a change in type of furnace, wheelchair ramps, widening halls and doorways, lowering cabinets, and so on.  Surprisingly, the same expenses can be claimed twice if they qualify for the Home Accessibility Expenses Tax Credit as discussed below.

Attendant care (caregiving), nursing home costs, and part of retirement home costs for disabled persons can be medical expenses 

Caregiving costs may qualify as “attendant care” medical costs.  If you are paying expenses for the care of your parent because he or she is infirm and cannot afford to do so themselves, you may also be able to claim certain attendant care, retirement home (community care) and nursing home costs as a medical expense. “Attendant care” expenses relate to wages paid to people for food preparation, housekeeping services, laundry services, health care, social activity programming, transportation and certain other costs. These wages may be a portion of a third party fee if you are paying an outside party or a retirement home for the services.  Costs of rent, food, supplies and home operating costs are not included in this definition.

Attendant care expenses can be:

• the cost of a person hired to help with care for your parent in the family home;
• a portion of the costs paid to a retirement home (the retirement home must provide a breakdown of their fees); and/or
• the full cost of nursing home.

To claim attendant care expenses for a retirement home (also commonly called community care home or assisted living facility), your parent will need a Disability Tax Credit Certificate (Form T2201) completed by their doctor or nurse practitioner and approved by CRA. If they are in a nursing home (full-time nursing care facility), you need either Form T2201 or a letter from a medical practitioner indicating that they need full time attendant care because of mental incapacity. The letter must certify that they are now, and for the foreseeable future will continue to be, dependent on others because of a lack of this mental capacity.

If they have a full‑time attendant at their own home, you need either Form T2201 or a letter from a medical practitioner indicating that they need a full-time attendant because they are and will be dependent on others because of mental or physical incapacity for a “long continuous period of indefinite duration”. Note that the Income Tax Act (ITA) in paragraph 118.2(2)(b) and (c) uses the phrase “remuneration for one full-time attendant”.  However, they have clarified the meaning to state that it includes multiple people providing care, not just one round-the-clock person.  In summary, for some situations you need Form T2201, and in others, either Form T2201 or a letter will suffice.  For the letter, the wording varies slightly depending on where your parent is living.

Attendant care costs may be payments to anyone age 18 or older except for a spouse.  An adult child is eligible to be the attendant.  A tax claim paid to an individual must be supported by a receipt showing the person’s social insurance number.  If the person is hired as an employee, instead of a self-employed contractor, the employer must withhold payroll deductions and abide by other employment legislation.

Generally speaking, if a person qualifies for the disability credit, then they can claim either the disability credit or the attendant care fees (but not both) for full-time care in the person’s home or for a nursing home (see exception below). A retirement residence, community care home or assisted living facility is not a nursing home. All costs for a nursing home can be claimed if applicable, including room and board, but only salary and wages paid for attendant care will qualify for people living elsewhere.

There is an exception to the either/or claim regarding the disability credit and the attendant care costs discussed earlier. If a person is living either in a private residence or in a retirement home, then ITA paragraph 118.2(2)(b.1) in combination with ITA subsection 118.3(c) comes into play.  A person can claim the disability tax credit and the attendant care fees where they claim only salaries and wages for the attendant, and they claim no more than $10,000 of these salaries and wages ($20,000 in year of death).  If they pay wages, for example, of $15,000, they can choose to claim only the attendant care, only the disability credit, or $10,000 of wages plus the disability credit.  For care paid directly, such as in their own home, they would know these figures. However, a retirement residence would need to provide a breakdown of their fees.  See RC4065, Medical Expenses as well as  CRA folio S1-F1-C1, starting at paragraph 1.31.  The RC4065 provides details and examples of attendant care, including a sample cost breakdown from a seniors’ residence. Of course, a person can only claim the Disability tax credit if they have a completed Form T2201 – a letter from a doctor is insufficient.

Because of the complexity of this area, I would like to review it again. If you are claiming the full cost of care in a nursing home, or if you are claiming the cost of a full-time attendant in your own home, you can claim either the disability credit or the attendant care costs, but not both. When living in a retirement home, you have two choices:

• claim the disability credit, and a maximum of $10,000 of attendant care expenses ($20,000 in year of death), or
• claim only the attendant care expenses.

If living in a nursing home, and you wish to claim only the part of the nursing home fees that are for attendant care wages (as provided to you by the home), then you have the same choices as noted above – you can claim the disability credit and up to $10,000 of attendant care costs.  However, other than possibly the first or last years in a long-term care home (which may only amount to a few months in that year), the cost of the home is usually much greater than $10,000 or $20,000.

5. Home Accessibility Expenses Tax Credit  

Where a person is either disabled or is age 65 or older, they qualify to claim renovation expenses paid to (a) improve accessibility to, or mobility within, a home, or (b) reduce risks of harm for accessibility or mobility.   Renovations to make the home wheelchair accessible and installation of walk-in bathtubs would be examples. This is a federal tax credit only.  The maximum claim of $20,000 would result in $1,500 of tax savings.  Such costs can be used to renovate a home owned by this qualifying individual, or for a home owned by a supporting person when the qualifying individual lives with that person. Subject to certain conditions, the expense may be claimed by either the qualifying individual or the supporting person, or shared by both. Interestingly, government grants and reasonable vendor rebates do not reduce the qualifying expenses as they do for the medical expense credit discussed above. As noted earlier though,  the same expenses can be claimed as both a home accessibility expense and a medical expense, if the qualifications for both are met.  Check to ensure these provisions still apply in the future, as they look too good to be true and may be revised.

6. Multi-generational Home Renovation Tax Credit

This is a federal credit that was introduced for the 2023 tax year.  It will provide a 15% credit on up to $50,000 of renovation costs to construct a secondary dwelling within your home for a “qualifying” relative that is over age 65,  or for a person who is age 18 or over and qualifies for the disability tax credit.  It is a refundable credit, meaning that it is paid to the taxpayer if it exceeds the taxes owing.  The credit can be claimed by “eligible” individuals living in the home, being those who are disabled or age 65 or older, or by certain of their relatives (such as a spouse).  The credit can also be claimed by certain relatives who own the home but do not live there (but the same expenses cannot be claimed twice).  In the parent-adult child scenario being discussed in this article, the credit could be claimed by either the parent(s) or the child if they live in the home, regardless of who has ownership.  Alternatively, if the home is owned by a child living elsewhere, they could claim the credit.   This secondary dwelling must be a self-contained housing unit with a private entrance, kitchen, bathroom facilities and sleeping area.  See details on the Government of Canada web site.

Conclusion

I warned you – the rules are complex – you can claim this, but not that; you need a prescription or doctor’s letter for some, not others; your dependant must live with you, or maybe not; and the rules are always changing.  My hope is that I have made you aware of some credits of which you were not previously aware.  Please let me know by email from my web site contact page about what you think.

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Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum