INCOME TAX ISSUES FOR SENIORS presented by Susan McInnes, CPA, CGA

Top tax issues Disability tax credit Medical expenses What happens to your assets when you die Disability tax credit – how to apply and the process to have it backdated and claim the credit for prior years Medical expenses – including what is allowable and nursing care and attendant care Estate planning – what happens to your assets when you pass away

Disability tax credit

How to claim Form can be found online at www.cra-arc.gc.ca Must be filled out by doctor and signed by both doctor and individual applying Submit to Canada Revenue Agency (CRA) for approval

Benefits Provides a tax credit of $7,899 – refund between $1300 -$1500 Transferable to spouse if entire credit is not required Credit can be applied to past years if doctor indicates impairment began in the past - If you receive CPP disability benefits or other types of insurance benefits you may not be eligible for the DTC – these programs are based on other criteria such as your inability to work Adjustments can be made to prior year returns if doctor backdates the eligibilty Credit is applied against taxable income – if you don’t have taxable income you won’t benefit from this credit.

Criteria Mental or physical impairment which impacts basic daily activities Impairment has to have lasted or be expected to last 12 continuous months If you are unclear if you are eligible – talk to your doctor and apply

Medical expenses Must be greater than 3% of net income Expenses are combined between spouses Can be claimed for any 12 month period that ends in the taxation year

Travel medical Travel over 40 km one way – claim $0.49 per km Travel over 80 km one way – same rate – meals and hotels are also claimable Simplified or detailed method can be used – either keep receipts or keep a log of appointments - Under simplified method, keep a log and claim a per km rate for the mileage and a claim a per meal amount. $15 per meal up to 3 per day - If it is necessary that you are accompanied to you appointment and it is over 80km one way, you are eligible to claim meals for that person as well.

Receipts to keep Debit slips alone are not acceptable receipts Appointment cards or appointment letter from doctor are acceptable for travel

Refundable medical expense supplement Maximum supplement is $1,172 or 25% of medical expense if income is between $3,421 - $25,939 Income must be employment income – pension income doesn’t qualify Completely refundable amount, even if no taxes are payable

Attendant care/Nursing home Retirement homes and Assisted living homes are considered separate by CRA. Nursing Care you receive in a Retirement home or Assisted living facility can be a medical expense

Nursing home Offers 24 hour care to patients All regular fees qualify as an eligible medical expense Must qualify for the disability tax credit or have other certification from the doctor Additional attendant fees – up to $10,000 eligible of the salaries paid - $20,000 in the year of death Regular fees include – food, accommodation, nursing care, administration, maintenance, social programming and activities Expenses not eligible – hairdressing

Attendant care Care provided by an attendant who performs personal tasks that the patient is unable to do May include meal preparation, cleaning services, transportation Companionship is also a service If a person is already employed as a single service provider – such as a maid – the provision of such service is not considered attendant care

Retirement home Does not provide 24 hour care to patients Attendant care is an eligible medical expense if itemized on invoice Attendant care is limited to $10,000 per year, or $20,000 in the year of death Example would be an assisted living facility

Attendant care or DTC?? Where remuneration for attendant care is claimed the disability tax credit may not be claimed However, an exception exists, where the attendant care expense is limited and the DTC may be claimed Needs to be determined based on individual circumstances

What happens when you die All assets will roll over automatically to surviving spouse unless an election is filed Rollovers occur at original cost – any capital gains will be deferred until surviving spouse dies All assets – including RRSPs – are deemed disposed of on the date of death

Principal residence Capital gains do not apply Deemed disposed of upon death Will transfer to the trust at the value on the date of death Capital gain is based on any increase in value of the property

TFSA Tax free savings account is not taxable upon death Disbursement will go straight to named beneficiary in the TFSA Spouse or common law partner can be named as successor holder – keeping the tax exempt status Any increase in the TFSA balance between date of death and payout is taxable to the beneficiary Successor holders contribution room is not affected by the transfer.

RRSP & RRIF Deemed disposed of at the time of death Will roll over to surviving spouse Taxable on the date of death Will transfer to the named beneficiary – does not become part of the estate

RESP No tax implications upon death Become part of estate Treatment should be stated in will