Taxes and Caregiving for Parents – What costs are deductible?

December 2022

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 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. For tax returns for 2016 and earlier, the rules differed, and if you need to make changes, contact me for an archived copy of an earlier article.  Remember, you can to back 10 years to correct errors and omissions.

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. Of course, there are they are incurred, such as medical expenses (including home care and nursing care costs) and the disability credit. For more information on what credits and deductions are available, see the Canada Revenue Agency publications RC4065, Medical Expenses and RC4064 “Disability-Related Information”.  Review this CRA website to see common tax benefits, deductions and credits available to seniors.

Tax credits available to you for taking care of your parents

[2020-2021 note: Also see the CRA web site for the temporary COVID-19 Canada Caregiving Recovery Benefit for assistance of up to $500 per week for individuals who are unable to work to take care of a family member because of COVID-19.]

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 personal tax return. These may include one or more of 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 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. However, certain credits do not require them to live with you. 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 for support?
4. How much income does your parent have?
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?

Note: Certain provinces have their own caregiver credit, and your parents may not need to be infirm.  For example, for 2022, the P.E.I. caregiver amount excludes the impairment requirement for your parent or grandparent as described in 2022 guidance as follows: “They were dependent upon you because of an impairment in physical or mental  functions, or they were your (or your spouse’s or common-law partner’s) parent or grandparent born in 1957 or earlier.” [i.e., age 65 or older].  However, for this PEI credit, the parent must be living in the same household.

In some cases, 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 on determining the support relationship.

Do you support your parents?

You likely do so in many ways, but do you qualify based on CRA’s criteria? Here are some considerations to help you. 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 Canada Revenue Agency (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, and 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 – formerly 305) (formerly “equivalent to married”)

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 2022, for most taxpayers, the maximum claim for the parent is $14,398 (for 2023, it will be $15,000) and will reduced dollar for dollar for 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 $12,719 (2023 – $13,521).

Only one person in a 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. The most frequent use of this claim is by single parents for a dependent child.

2. Canada Caregiver Credit  (Line 30450 – formerly 307)

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 “Canada Caregiver Credit”. Prior to 2017, your parent did not need to be infirm for the caregiver credit, but he or she must now be infirm to qualify (conditions differ for provincial amounts).  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.

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. If your parent has a disability certificate, this will suffice; however, the conditions needed to get a disability certificate are more onerous than necessary for this purpose, in which case a letter from your doctor or nurse practitioner will be satisfactory. The specifics are not clear on what qualifies as an impairment versus a disability, but your parent’s need for assistance due to mental or physical issues needs to exist and be able to be documented by your medical practitioner. Your parent does not need to live with you.  My experience is 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 2022, the maximum claim for the parent is $7,525 (2023 – $7,999) and will reduced dollar for dollar after your parent’s net income on his or her tax return exceeds $17,670 (2023 – $18,783).  Your parent’s income will need to be less than $25,195 in 2022 (2023 – $26,782).

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 $12,719 in 2022 if you are in the highest federal tax bracket or $14,398 otherwise ($13,521 and $15,000, respectively, in 2023);
• To this base amount, you add $2,350 in 2022 ($2,499 in 2023) 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 $7,525 in 2022, then you can claim $7,525; otherwise, claim the higher amount.

3. Disability amount transferred from a dependant  (Line 31800 – formerly 318)

If your parent has a disability credit, and is unable to use it all himself or herself, then it can be transferred to a supporting person. We will not discuss the eligibility requirements for claiming the disability credit in this article. Please see the Canada Revenue Agency publication RC4064 “Disability-Related Information.”

To be eligible to claim a transfer of all or part of your parent’s disability amount of $8,870 in 2022 (2023 – $9,428), 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.  My experience is 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.  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 his or her taxes. Only the balance is transferable, but 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.  Therefore, if this is the case, you may not be able to transfer the disability tax credit if your parent has claimed such expenses.  For example, a person may claim up to $10,000 of attendant care expenses and the disability tax credit, which may leave nothing or very little to transfer.  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, if you would qualify for Disability Tax Credit transfer if you either:

• would qualify for the Eligible Dependant Amount if you had not been married or living common-law and if your dependant 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 – formerly 331)

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 $2,479 in 2022 and $2,635 in 2023) and 3% of your net income before you can claim them.  Provincial thresholds differ (usually lower, such as $1,678 in PEI for 2022, unchanged for many years)

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.

Attendant care and nursing home costs are medical expenses

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 and nursing home costs as a medical expense. “Attendant care” expenses include wages paid to people for food preparation, housekeeping services, laundry services, health care, social activity programming, transportation and certain other costs. Costs of rent, food, supplies and operating costs are not included in this definition.

Attendant care expenses can be:

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

To claim attendant care expenses for a retirement home (also commonly called community care or assisted living facilities), your parent will need a disability certificate (Form T2201) completed by their doctor or nurse practitioner. 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 for the foreseeable future. If they have a full‑time attendant at home you need Form T2201, or a letter from a medical practitioner indicating that they need full time attendant care because of mental or physical incapacity for the foreseeable future. Note that the Income Tax Act (ITA), in paragraph 118.2(2)(b) and (c) says “remuneration for one full-time attendant”, but that phrase also includes multiple people providing care, not just one round-the-clock person.  In summary, take note that whether you need form T2201 or just a letter, and the wording of the letter varies depending on where your parent is living.  Also note that attendant care costs cannot be paid to your spouse or to a person under age 18; another adult relative, including your child age 18 or older, would qualify.

Generally speaking, if a person qualifies for the disability credit, then you 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 in the previous paragraph. If you are living at home or in a retirement home, then ITA paragraph 118.2(2)(b.1) in combination with ITA subsection 118.3(c) comes into play.  You can claim the disability credit and the attendant care fees where you claim only salaries and wages for the attendant, and claim no more than $10,000 of these salaries and wages ($20,000 in year of death).  If you pay wages, for example, of $15,000, you 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 your own home, you would know these figures. However, a nursing home or retirement residence would need to provide you with a breakdown of their fees. I have encountered some seniors’ residence administrators who were not be aware of these rules, in which case I needed to educate them. 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, you can only claim the disability credit if you 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.

5. Home Accessibility Expenses) (line 31285 – formerly 398)

Where a person is disabled or is age 65 or older, they qualify to claim renovation expenses paid to improve accessibility to, or mobility within, a home (or expenses to reduce risks of harm for accessibility or mobility). Renovations to make the home wheelchair accessible and installation of walk-in bathtubs would be examples. The maximum claim of $20,000 in 2022 (previously $10,000) 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. Furthermore, 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 credit that was introduced for the 2023 tax year.  It will provide a credit of up to $50,000 of renovation costs to construct a secondary dwelling within your home for a relative that is over age 65,  or for a person who is age 18 or over and qualifies for the disability tax 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 here.

Conclusion

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.  Review the CRA Medical Expenses and Disability-Related Information guides regularly and work with an experienced and trained tax preparer when in doubt.  If this article was useful to you, or if you have suggestions, a brief email to me from my contact page would be helpful to know whether I should continue publishing it.

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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