Caregiver & Nanny Tax Reduction Opportunities
Caregiver costs may be claimed as a
Medical Expense Tax Credit, or
Attendant Care Deduction
Medical Expense Tax Credits are available to individuals who have paid caregiver expenses for themselves or certain of their dependants. Dependents include a dependent child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew of the individual or of the individual's, if they lived in Canada at any time during the year. Qualifying expenses include salary or remuneration as well as the employer's portion of Employment Insurance premiums and Canada or Quebec Pension Plan contributions.
- For persons who qualify for the disability amount, caregiver expenses may be claimed for part time or full time attendant care in the persons home. Expenses can be claimed by:
a) the disabled person or supporting relatives as part of the medical expense tax credit, or
b) the disabled person ( in certain circumstances) as part of the disability supports deduction*.
The caregiver costs can also be split between the disability supports deduction and medical expenses.
*Disability supports deduction.Â Individuals who have incurred attendant care expenses in order to be employed or self-employed, go to school or conduct research, can claim these costs as part of the disability supports deduction, as a reduction of income. The expenses claimed are limited to the amount of income earned from employment, self-employment, scholarships, bursaries, fellowships, and research grants (earned income).
- For persons who do NOT qualify for the disability amount, caregiver costs can be claimed for full time attendant care in the persons home. A medical practitioner must certify in writing that the person needs a full-time attendant due to mental or physical infirmity and will likely continue to be dependent on others for the long term.Â
An individual may also be entitled to receive a refundable medical expense tax credit in respect of the same medical expenses for which a medical expense tax credit was claimed.
Attendant Care Expense Deduction is available to individuals who are entitled to claim the disability tax credit, and who have incurred expenses for personal care that are necessary to enable them to work. This can be claimed for amounts paid by the person with a disability to a caregiver who was not the taxpayer's spouse or common-law partner, and who was at least 18 years old when the payments were made. Caregiver costs cannot be deducted if already claimed as medical expenses.
Nanny costs may be claimed
to reduce income taxes
Child Care Expenses eligible for deduction include expenses for providing child care services to enable the supporting person to work, carry on a business, do research pursuant to a grant, or attend a secondary school or designated educational institution where the taxpayer is enrolled in a full-time or part-time educational program.
Eligible expenses include remuneration paid to a nanny as well as placement agency fees paid to locate a nanny. Expenses must be for the care of an eligible child by a person who is not the child's father or mother, a person under 18 who is related to you, or "Another Person".
"Another Person" for the purpose of claiming child care expenses, is one who lived with you at any time in the year, and at any time during the first 60 days of the year was the eligible child's parent; your spouse or common-law partner, if you are the father or the mother of the child; or an individual claiming an amount for the eligible child on line 305, 306, 315 or 367 of their Schedule 1.
Eligible children must be under 16 years old during the year, dependent on the taxpayer or the taxpayer's spouse or common-law partner for support, and whose income for the year does not exceed the basic personal amount for the year. The age limit does not apply if, during the year, the child is dependent on the taxpayer or on the taxpayer's spouse or common-law partner and has a mental or physical infirmity.
Other deductions can offset
Caregiver and Nanny costs
Amount for an Eligible Dependent (formerly known as equivalent to spouse amount). You may be able to claim this amount if, at any time in the year, you met all of the following conditions:
- you did not have a spouse or common-law partner or, if you did, you were not living with, supporting, or being supported by that person;
- you supported a dependant (parent or grandparent; or child, grandchild, brother, or sister under 18, or mentally or physically impaired); and
- you lived with the dependant in a home that you maintained.
You may not claim this amount if you are claiming a spouse or common-law partner amount.
Child Amount Tax Credit. You can claim a credit for each of your or your spouse's or common-law partner's children who are under 18 years of age at the end of the year. Either parent may claim this credit. You can still claim this amount for the child if you were unable to claim for an eligible dependant because:
the child's net income was more than the basic personal amount for the year; or
you are already claiming the amount for an eligible dependent for another child.
Infirm Dependent Amount You can claim an amount determined annually for each of you or your spouse's or common-law partner's dependent children or grandchildren only if that child or grandchild had a mental or physical impairment and was born in 1990 or earlier.
Children employing a caregiver for
a parent who lives with them can reduce taxes
Caregiver Tax Credit. If, at any time in the tax year, you (either alone or with another person) maintained a dwelling and you or your spouse or common-law partner's parent or grandparent aged 65 or older lived with you, you may be able to claim the Caregiver Amount tax credit. This non-refundable tax credit is reduced when the net income of the parent or grandparent exceeds a certain level. This tax credit is also available when certain other dependent relatives are living with you, but for other relatives the tax credit is not available unless the relative is dependent on you due to mental or physical infirmity.
More tax credits for those
requiring live-in care
The Disability Amount Tax Credit provides tax relief to individuals who, due to the effects of a severe and prolonged mental or physical impairment, are markedly restricted in their ability to perform a basic activity of daily living as certified by a qualified health practitioner, or would be markedly restricted were it not for extensive therapy to sustain a vital function.
Individuals are markedly restricted if, all or substantially all of the time, even with therapy or the use of appropriate devices and medication, they are blind or unable to perform a basic activity of daily living or require an inordinate amount of time to perform the activity. The basic activities of daily living are: walking; feeding or dressing oneself; perceiving, thinking and remembering; speaking; hearing; and eliminating bodily waste.
This credit may not be claimed if the cost remuneration for a caregiver for the person with a disability is claimed as a medical expense tax credit.
Disability Amount Supplement Tax Credit may be claimed if you qualify for the Disability Amount Tax Credit and are under 18 years of age. However, child care expenses and attendant care expenses anyone claimed for you for 2008 may reduce the supplement. Attendant care expenses you claim for yourself for 2008 may also reduce the supplement.
Assistance for renovations for a Caregiver/Nanny
room, or to allow seniors to live at home
Seniors Property Tax Deferral Program.
Seniors Property Tax Deferral Program (SPTDP) allows eligible senior homeowners to defer all or part of their property taxes through a low-interest home equity loan with the Alberta government.
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The Home Adaptations for Seniorsâ€™ Independence (HASI) program offers financial assistance for minor home adaptations that will help low-income seniors to perform daily activities in their home independently and safely.
Homeowners and landlords may qualify for assistance if the occupant is 65 years of age or over and has difficulty with daily living activities due to loss of ability brought on by aging, the total household income is at or below the program income limit for the area, and the home is a permanent residence. Adaptations should be minor items related to loss of ability. Financial assistance may be available in the form of a forgivable loan. The adaptations must:
- Improve access to basic facilities within the home.
- Increase the physical safety for the resident. Examples of eligible adaptations are handrails in hallways, easy-to-reach work and storage areas in the kitchen, lever handles on doors and grab bars in the bathroom.
Other Renovation Programs may be available if extensive modifications are required to improve accessibility, such as wider doorways and increased space for wheelchair maneuvering. You may be eligible for financial assistance through the Residential Rehabilitation Assistance Program for Persons with Disabilities. CMHC also offers financial assistance to create secondary or garden suite for low-income seniors or adults with a disability. To find out how to apply for financial assistance, or for more information about these programs, please contact the CMHC.