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Banka: Caregiver tax credit has arisen from home care needs
The caregiver non refundable tax credit is becoming more prevalent in the filing of today’s tax returns because many of us have decided to take care of our aging parents or may have a child that has a physical or mental impairment.
The maximum credit that can be claimed is $4,223 for each dependent subject to several conditions.
The first condition is that the dependant person has to be living with you at sometime during the year and cannot be just visiting.
The dependant needs to be a resident of Canada.
The dependant can be a child, a parent, grandparent, brother, sister, aunt, uncle, niece or nephew.
The dependant must be 18 years and older.
The dependant’s net income from line 236 of their tax return cannot exceed $18,645.
The person you are claiming needs to have been dependent on you for support due to a physical or mental impairment.
There are three places in the income tax return where this claim needs to be recorded.
The first is on Schedule 5 where the details of the dependant are entered as well as the nature of the infirmity.
The next spot is line 306 for dependants that are 18 and older.
The calculation begins with a base amount of $10,215.
The dependant’s net income is deducted from this amount.
If the result is more than $4,223, the maximum deduction of $4,223 is taken.
Line 315 addresses the Caregiver amount.
This line begins with a base amount of $18,645 less the dependent’s net income.
If the amount is greater than $4,223, then the maximum deduction of $4,223 is taken.
If a deduction was claimed on Line 306 this is now deducted from the $4,223 claimed on this line.
If the dependant is a child and you make child support payments, you cannot claim a caregiver amount.
If you have recently gone through a separation you may be able to claim an amount for a portion of the year as long as no support payments have been claimed.
If you have joint custody, you may split the claim with your spouse but it cannot exceed the maximum claim.
If you have more than one dependant living with you, then claim this deduction for each dependant.
If you take an eligible dependant deduction for this dependant, you cannot also claim a caregiver amount.
If anyone else claims the person as a dependant, you cannot also claim a caregiver amount.
The Canada Revenue Agency defines a parent as someone who had custody and control of you when you were under 19 years of age and on whom you were completely dependent.
Due to the combining of families, a child can include someone who is actually older than you, but who has become dependent on you.
In addition, the dependant may also receive a disability amount if form T2201 has been filled out by your doctor and approved by CRA.
If the dependant does not use the entire disability credit to offset his or her income, the balance could be transferred to your return.
This is only possible if you have made a claim on line 305 and you are not claiming child support and no one else is making the claim.
As a caregiver you may be eligible for other benefits such as compassionate care benefits from employment insurance if you need to take time off work to care for someone that is terminally ill or near death.
If you are self employed, you can elect to register for EI and may be eligible for compassionate care benefits.
Sometimes you may need a break from taking care of a physically or mentally infirm dependant for a day or a few hours.
If that is the case, some of the local nursing homes offer respite services whereby they will take care of your dependant giving you time to yourself or even just to run some important errands.
Finally, you may opt to have someone come in and live at the home to provide the care giving services.
Service Canada provides a Live-In Caregiver program whereby a professional caregiver can work in Canada.
These persons are qualified to work without supervision in a private household to take care of children and elderly persons who have disabilities.
Both the CRA web site and the Service Canada web site have links to a short questionnaire that will help you determine if you qualify for the caregiver non-refundable tax credit.
The 2011 federal budget has introduced a new Family Caregiver non-refundable tax credit deduction of $2,000 in addition to the existing credit which is to be implemented for the 2012 tax year.
Gabriele Banka is a Certified General Accountant and the owner of Banka & Company Inc.