All About Estates


Last month, a fellow blogger Audrey Miller wrote on care expenses and services in general which may be eligible for a tax credit in one form or another.

Co-incidentally the Canada Revenue Agency (“CRA”) was recently asked to comment on the tax system overall as it applies to seniors and gave some of their perspective.

The taxpayer making the enquiry to the CRA was concerned about seniors who pay for their own in-home and end-of-life care. The taxpayer indicated that his( her) father, who resides in a residential facility, pays more income tax than when he lived independently, and maintained the Income Tax Act did not provide any tangible recognition of the funds he uses to pay for his own care…

The taxpayer’s father primary sources of income were his registered pension plan (RPP) and registered retirement income fund (RRIF). The CRA noted that while pension income and withdrawals from RRIFs are included in taxable income, the contributions the father made to the RPP and the registered retirement savings plan (RRSP) were deductible from his income at that time, which reduced his taxes payable for the respective tax years. The CRA also noted that income a taxpayer earned in registered plans, including RRSPs and RRIFs, grows tax-free within the plans until the taxpayer withdraws it.

The CRA commented that the personal income tax system has generally used non-refundable income tax credits rather than income tax deductions to offer assistance for personal expenses. The CRA noted that there are several tax credits that assist disabled and senior individuals. The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities reduce the amount of income tax they have to pay. The purpose of the DTC is to ensure tax fairness, the CRA noted, by allowing some relief for disability costs incurred by individuals who have one or more severe and prolonged impairments in mental or physical functions.

To assist individuals who have significant medical expenses, the CRA reminded the taxpayer that a non-refundable medical expense tax credit is available if the individuals” eligible medical expenses are greater than the lesser of 3% of their net income or $2,208 (for the 2015 tax year), the medical expense tax credit is available to individuals who have attendant care or nursing home costs. Individuals who have attendant care or nursing home costs and qualify for the DTC can claim the greater of:
* The DTC plus a maximum of $10,000 in salary and wages for attendant care; and
* The full amount paid for salary and wages for attendant care or for nursing home costs.

The CRA noted that it is responsible for administering the tax system and enforcing tax policy and legislation, while the Department of Finance Canada is responsible for changing tax policy and legislation. Because most of the taxpayer’s concerns related to tax policy, they sent a copy of the correspondence to the Department of Finance, for their consideration. Interesting that the CRA would think enough of the enquiry to send it to the tax policy folks.

I had one further thought on this. As an executor or trustee for an estate for someone who may have incurred significant care expenses in the latter years of their life, keep in mind that much of what Audrey wrote about and the some of what is written here may be applicable to the terminal return and possibly for prior years if applicable. Make sure you consult a professional.

Happy Reading

About Steven Frye
Baker Tilly WM LLP is a leading, independent audit, tax, and business advisory firm based in Vancouver and Toronto, serving clients across Canada. Drawing on well-trained teams across a variety of disciplines, we ensure the alignment of our professional’s skills and experience with client requirements, resulting in exceptional service and business outcomes.