Tax breaks for seniors

 

Senior Couple At Home With Bills Worried About Home Finances

 

 If you turned 65 in 2014 you could be eligible for some lucrative tax breaks when you file your return in April. Other deductions are also available to younger tax payers but you are much more likely to take advantage of them as you age.

Here’s what you need to know:

Age Amount: You and your spouse can each claim this amount if you were 65 years of age or older on December 31, 2014. Where either of your net income was $34,873 or less, the age deduction is $6,916. If either of your income was $34,873 but less than $80,980, complete the chart for line 301 on the Federal Worksheet to calculate your claims. Remember to also claim the corresponding provincial or territorial non-refundable tax credit to which you are entitled, on line 5808 of your provincial or territorial Form 428.

Pension income splitting: If you’re receiving a pension, you may be eligible to split up to 50% of your eligible pension income with your spouse or common-law partner. The charts Eligible pension and annuity income (less than 65 years of age) and Eligible pension and annuity income (65 years of age or older) clarify pension income that is eligible for pension income splitting.

The following amounts you may receive are not eligible for pension income splitting:

  • Old Age Security payments
  • Canada Pension Plan, Quebec Pension Plan
  • Any foreign source pension income that is tax-free in Canada because of a tax income from a United States individual retirement account (IRA); or
  • Amounts from a RRIF transferred to an RRSP, another RRIF or an annuity.

Pension income amount – If you are age 55 or older you may be able to claim a tax credit up to $2,000 if you reported eligible pension, superannuation, or annuity payments on your return. The information in Eligible pension and annuity income (less than 65 years of age) and Eligible pension and annuity income (65 years of age or older) also applies to pension income for the purposes of the pension income credit. If you don’t have a pension, there are numerous strategies available to generate eligible pension income.

For example, Jim Yih at retirehappy.ca suggests that at age 65 you transfer $12,000 to a RRIF and take $2,000 out per year from age 65 to 71(inclusive). This essentially allows you to get $2000 out of your RRSP tax-free for 6 years. Unused pension tax credits can also be transferred to a spouse or common law partner.

Disability Tax Credit (DTC): Where you or your spouse have a severe and prolonged impairment in physical or mental functions, and meet certain conditions, you may be eligible to claim the disability amount of $7,766. If either of you were eligible for the DTC for previous years but did not claim it when you filed your return, you can request adjustments for up to 10 years under the CRA’s Taxpayer Relief Provisions. Several years ago I assisted a close relative to apply for the DTC retroactively and she received a rebate of thousands of dollars. There is a detailed form that must be completed and signed by a medical professional, but it is well worth the effort in appropriate circumstances. Also, once CRA approves your claim for the DTC you will be able to deduct some expenses for attendant care at home or in a nursing home.

Medical expenses: This tax credit is available to all taxpayers. However, if you are retired and no longer have group coverage for expensive services like dentistry or paramedical practitioners (e.g. physiotherapists, massage therapists, chiropractors) not covered by medicare, your medical bills may be high enough to claim the medical expenses tax credit for the first time. Medical expenses can be claimed for you, your spouse or common-law partner, and dependent children under 18. Only expenses in excess of the lesser of $2,171 for 2014 ($2,208 for 2015) or 3% of net income can be claimed for the federal tax credit.  The lowest tax rate is applied to the medical expenses to determine the amount of the tax credit. Medical expenses can be claimed for any 12 month period ending in the current tax year, and not claimed in the prior tax year. Eligible medical expenses are described here. The list does not include optional cosmetic surgery.

 

 

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