As individuals age and medical conditions become more prevalent and significant, the need for assistance in daily activities increases. As a result, many consider moving to nursing homes, retirement homes, or smaller apartments or condos. Alternatively, some may choose to remain in their home but engage others for assistance or make structural modifications to improve accessibility or safety. Several tax benefits may be available to assist with these potentially costly transitions. This article focuses on benefits within the federal tax system though many other supports may be available (e.g. provincial programs and subsidies).
Many of these tax benefits are available through the medical tax credit (METC). The METC reduces taxes where medical expenses are greater than the lesser of the following amounts:
* 3% of the payer's net income; or
* $2,352 (in 2019; indexed annually for inflation).
Expenses in excess of the threshold generate a credit at the lowest personal tax rate (15%). A similar process determines the provincial METC (10% rate in Alberta). In other words, taxes are reduced by 25% of eligible expenses.
Eligibility for the METC depends on a number of factors, including the type of expenditure (eg. fees paid to a nursing home, renovations to one's home) and the specific medical condition or impairment.
Some claims require the individual be eligible for the disability tax credit (DTC). To be eligible, Form T2201 must be certified by a qualified medical practitioner and submitted to the Canada Revenue Agency (CRA). There are several ways to qualify for the DTC but generally the individual must have an impairment which results in a marked restriction in an activity of daily living.
A nursing home is a facility which provides full-time care (including 24-hour nursing care) to those that cannot care for themselves. A location may be considered a nursing home even if it is not publicly described as one, as long as it meets this description.
Generally, the full amount paid for full-time care at a nursing home is eligible to claim as a METC. This would include fees paid for food, accommodation, nursing care, administration, maintenance, social programming and activities. Other personal expenses (such as hairdresser fees) are generally ineligible.
In order to claim these amounts, the individual must either:
* be eligible for the DTC; or
* receive certification from a medical practitioner that they will be dependent on others...