2017 has started which means that it is time to prepare our 2016 tax returns and start planning for our 2017 taxes, so that we can optimize our wealth, reduce our liability and prepare for our futures.
For those of you who upgraded to senior status last year, or will do so by the end of 2017, this can mean there will be some changes to your income tax returns and tax plans.
While some may argue that being a senior is not something to be proud of, we beg to disagree. Becoming a senior is a good thing. It means that you have valuable experience and wisdom, from years of challenges and success, that you can share with others. It means that you have more time to travel, spend time with your family and do all the things you love. It will get you into many post-secondary institutes at no cost and it means that you have access to more benefits, credits, deductions and discounts than ever before.
In fact, the Canada Revenue Agency (CRA) has many great tax credits, deductions, and benefits that are valuable for seniors, and even to those who haven’t yet advanced to senior status, in some cases!
Here are 10 benefits and credits that are popular for seniors:
Spouses, or common-law partners, who receive a pension, may be eligible to split that pension with one another, up to 50%. Only one spouse can choose to split their pension, but this choice is left to you and your partner and can change from year to year.
There are some eligibility criteria that must be met if you wish to take advantage of this opportunity, but if you qualify, pension income splitting can help reduce your tax payable as well as reinstate Old Age Security (OAS) benefits and the Age Credit by reducing clawbacks (OAS and Age Credit repayments).
Guaranteed income supplement (GIS)
GIS is a non-taxable benefit for OAS recipients with a low income. To qualify, your income must be below the maximum annual threshold, which can be found on the Government of Canada website. Your GIS benefit will be renewed, so long as you file your return by the filing deadline.
Registered retirement savings plan (RRSP)
Deductible contributions to your RRSP in any tax year, until the year you turn 71, can be used to reduce your tax liability. RRSP funds can be withdrawn at any time, so long as your RRSP is not locked, but the withdrawal will most likely be subject to tax.
Registered disability savings plan (RDSP)
This savings plan can help families save for the financial security of a person who is eligible for the disability tax credit. RDSP contributions are not tax deductible and can be made until the end of the year in which the beneficiary turns 59.
Goods and services tax/harmonized sales tax (GST/HST) credit
This credit is a quarterly payment that helps offset GST/HST paid by low or modest income families. The payment is not taxable and eligibility is automatically determined when you file your income tax and benefit return each year.
As such, even if you do not receive income, you must file a return to benefit from this credit.
Either you or your spouse/common-law partner can receive the GST/HST credit, but not both. You cannot choose who will receive the credit. It will be given to the person whose return is assessed first.
Eligible medical expenses that you, your spouse or common-law partner paid for, may be claimable on your income tax return. You may also be able to claim medical expenses for your children, if they were born in 1999 or later.
Unlike other tax credits, you can claim any expenses incurred in any 12-month period that ends in the income tax year, so long as the expenses were not previously claimed.
The list of eligible expenses in long but it is important to note that not all medical expenses are eligible. To see a list of eligible expenses, visit the CRA website.
The age amount results in a tax credit for individuals who are 65 years old or older as of December 31 of the applicable tax year. As a result, the tax owing, in the year this amount is claimed, will be reduced.
In 2016, if your net income was lower than $83,427, you can claim a tax credit of up to $7,125, assuming you meet the eligibility criteria.
In 2017, you can receive a tax credit up to $7,225.
This amount allows taxpayers to claim a non-refundable tax credit of up to $2,000 if you report eligible pension income, superannuation, or annuity payments on your income tax return. This will result in a lower tax owing.
If you, your spouse, common-law partner, or dependent suffer from a severe and prolonged impairment, either physically or mentally, you may qualify for this amount. To claim the disability tax credit (DTC), a medical practitioner must fill out Form T2201, Disability Tax Credit Certificate and the form must be kept with other tax documents and receipts.
If you are caring for a dependent, 18 years or older, with an impairment you may be able to claim the family caregiver amount. Before claiming this amount, you should obtain a signed statement from a medical practitioner, or have Form T2201, Disability Tax Credit Certificate filled out.
If you qualify for this amount, you could receive $2,121 to include in your calculation for non-refundable tax credits on your income tax return.
