By Ken Pope, Rafiga Gurbanzade, and Crystal Terris
How can changes to the Caregiver Tax Credit—now the Family Caregiver Amount Tax Credit—benefit you and your family?
Supporting and caring for a dependent elderly family member can be expensive and stressful. At times, it may require a person to stay out of the workforce and at home to care for their loved one. For many families, this can cause both emotional and financial distress.
Claiming the Family Caregiver Amount Tax Credit (previously the Caregiver Tax Credit [CTC]) is one way in which families can alleviate some of this financial burden.
A caregiver tax credit may apply to individuals who have a family member with a disability. Until 2017, only those who lived with their families could claim the credit. In 2017, however, the federal government introduced a new budget proposal. The new law consolidated the Dependant Tax Credit, Caregiver Tax Credit and Family Caregiver Tax Credit into the new Family Caregiver Amount.
One of the most substantial changes was that the live-in requirement was removed. This was a big change, the importance of which is underestimated by many families. Because of this change, the Family Caregiver Amount may apply to post-2017 claims regardless of whether the dependent resided with a caregiver or not.
Retroactive for 10 years
If the caregiver is eligible for the Family Caregiver Amount, he or she may receive about $1,000 per year in refunds when submitted retroactively 10 years back. A claimant should note, however, that pre-2017 CTC claims must satisfy the live-in requirement.
The Family Caregiver Amount has a number of other specifications.
1 Dependency: One of the major prerequisites is the dependency of the person with a disability. A caregiver can claim the Family Caregiver Amount for one or more family members who are dependant on the caregiver for support because of an impairment in physical or mental function. In essence, an individual is dependent if he or she regularly relies on the caregiver to provide some or all of the basic necessities of life, such as food, shelter and clothing.
2 Relationship: A caregiver may be eligible for the Family Caregiver Amount if the claim is for a parent, grandparent, brother, sister, aunt, uncle, niece or nephew. It can be possible to claim the Family Caregiver Amount for more than one person.
A caregiver tax credit may apply to individuals who have a family member with a disability.
Simply put, the effect of the 2017 change is massive and the numbers are staggering. Around 365,000 households in Ontario provide care to a family member with a disability and may be eligible for the Family Caregiver Amount. And by claiming the CTC/Family Caregiver Amount retroactively 10 years back, a caregiver can recover $7,000–10,000 in tax credits. Yet, we often notice that families miss out on this opportunity because of a lack of information or misinformation.
Is getting a refund complicated?
The process of retroactively claiming the CTC/Family Caregiver Amount may seem complicated. Only one tax credit per year can be claimed. For 2017, the caregiver may claim the amount for an eligible dependant on line 305 of Schedule 1, in which case you can only make full use of the credit if the dependant’s net income is less than $11,635. For every dollar of net income found on line 236 of the dependant’s tax return, this credit is eroded until the income reaches $11,635, at which point the credit becomes fully eroded. If the caregiver chooses to use line 307 instead, however, then the credit is not fully eroded until the net income of the dependant exceeds $23,046.
Consider Ontario Disability Support Payments: Many people who have disabilities are receiving Ontario Disability Support Payments, which usually generate approximately $10,000–14,000 of income for the dependant. This income erodes the caregiver’s tax credits and needs to be considered when determining which credit is most beneficial.
If the claimant is requesting tax credits for the dependent on lines 303 or 305 of Schedule 1, the claimant cannot claim the amount on line 307.
About 46,000 people are on the Ontario Disability Support Program who live with their families.
Claiming for more than one person: Depending on a number of factors—such as the residency of the individual with a disability, their relationship to the claimant, support provided to the dependant and their level of impairment—a caregiver may be able to claim for more than one person. Furthermore, the claimant can split the Family Caregiver Amount with another person who also provides support to the disabled individual, although the maximum allowable amount cannot exceed the maximum of about $7,000–10,000 in refunds.
Statement required: A caregiver may be required to provide a statement signed by a medical practitioner describing the nature of the mental or physical impairment and the duration of the disability.
Ask a professional
As a start, caregivers should review their tax return statements and check lines 305 and 307 in post-2017 statements and lines 306 and 315 in pre-2017 statements. If no credits have been claimed on the above-mentioned lines, then this should be discussed with a qualified professional to determine which lines would be the most beneficial to the caregiver’s tax return.
When working with tax credits, it is best to seek professional assistance. Having a family member with specific needs changes everything. The costs of supporting people with disabilities can be high. The good news is that there are options available to help reduce these costs. By contacting a qualified professional, you can determine which credits are the most appropriate for your family’s situation.
Ken Pope LLP, is a trusted estate planning advisor. His practice has become a one-stop shop for families living with special needs across Ontario. Rafiga Gurbanzade is a staff lawyer and Crystal Terris is a licensed paralegal with the Law Office of Kenneth C. Pope.