There are three non-refundable tax credits you may be able to claim if you are caring for and supporting a member of your family in 2016. Injured relatives, caregivers, and family caregivers can get a tax credit for caring for them.
Caregivers often have to pay for things that can't be changed, and these tax credits were meant to help them pay for some of these costs. However, the rules were hard to understand.
There was news about a new tax credit for caregivers in 2017. This year, these three nonrefundable credits were streamlined and combined into one new nonrefundable credit, the new Canada Caregiver Credit, which was a big move. A look at how the old tax credit system worked will help us see how things changed in 2017.
The old tax credit system (for 2016 returns)
Until 2016, there were three different types of credits under the old system, each with a different set of requirements for both the caregiver and the dependent.
Dependent credit for the elderly
A 15% non-refundable tax credit is available for those who provide financial assistance to a member of their family who does not qualify as their husband, wife, or civil partner but is physically or mentally disabled. The dependent does not have to reside with you in order for you to receive the credit, and you can claim the credit regardless. Credit amounts are limited to $6,788, and each dollar above $6,800 will reduce the credit dollar-for-dollar. The credit ceases to apply when the income of your dependents exceeds $13,595.
Caregiver credit
Those responsible for providing home care to parents or grandparents who are older or to certain other family members who are over 25 years old may be eligible for this 15% non-refundable tax credit. The people in your family who are financially dependent on you because of your mental and physical flaws must get help from you.
Depending on the condition of the dependent, the maximum credit might be $6,788 or $4,667. Your dependent's net income increase above $15,940 will reduce the credit amount by the same amount; this reduction applies dollar-for-dollar. It will be completely phased out once the individual has a household income of $20,607, or $22,748 for a dependent who is infirm.
The family caregiver tax credit
Non-refundable third-party credit amounts provide assistance to caregivers who are unable to take care of a family member due to their infirmity. For an amount of $2,121, this credit amounts to 15%. The caregiver credit, the dependent of infirmity credit, the dependent of an alcoholic or drug-dependent spouse, or the dependent of an eligible dependent might be added on in addition to the other dependent deductions in this category. A new tax credit for family caregivers will be available to help infirm minor children. This credit will be separate from the minor child tax credit that has been cut for 2015.
New Caregiver Credit (Started in 2017)
The transition to the new caregiver credit will simplify the existing tax credits for caregivers with the latest Canada Caregiver Credit (CCC). The new caregiver credit will simplify the existing system of tax credits for caregivers.
The government believes a new credit programme will be more effective at supporting those in need. As a result of this law, some caregivers who are currently not eligible for a tax benefit because of the income of their dependents might be able to receive aid. As a consequence, caregivers who are responsible for supporting dependents will receive tax assistance.
The CCC amounts for infirm dependents are $6,883 for parents, grandparents, siblings, brothers, sisters, aunts, uncles, nieces, and nephews, as well as adult children.
An infirm spouse or common-law partner will be entitled to a contribution of $2,150 per year. For an individual who claims a dependent credit for an infirm dependent under the age of 18, or for a minor dependent under the age of 18, the dependent must be infirm. This is how the caregiver tax credit and the family caregiver tax credit worked in 2017. These amounts, adjusted for inflation in 2017, were in line with the amounts that could have been claimed for these dependents in 2017.
Who can claim the new CCC credit?
You will be able to claim the new credit if the dependent's net income exceeds $16,163 (for 2017). This will result in the CCC being reduced dollar-for-dollar. Nevertheless, it should be noted that seniors who live in their own apartments without the services of the CCC are no longer eligible for the program.
There are no changes to any of the other rules in any way. Depending on the circumstances, only one CCC amount may be utilised in support of an infirmed dependent. As long as the total claim for that dependent does not exceed the annual maximum allowance for that dependent, multiple people caring for the same person can apply for the credit together.
There are two examples given in the budget document of how the CCC may benefit some families. In the first example, as described, a sister takes care of a sister who is pregnant and who is not able to work but remains on social assistance at a monthly rate of $14,000. Under the old system (2016), the caregiver was not eligible for tax benefits due to her sister's excessive income. It is true that she will be able to claim $6,883 in tax relief under the new CCC, saving her $1,032 over the previous year.
Another example describes the situation of a wife caring for her husband who is unable to work and is receiving a disability benefit of $15,000 from the Canada Pension Plan. She could be eligible for $2,150 in tax relief under the new CCC, which would equate to $323 in tax relief that she would otherwise not be eligible for.
Conclusion
That's pretty much all there is to know about the new consolidated caregiver tax credit and how it works. In the event of a problem, you should contact the Canadian tax authorities. They can provide you with additional guidance and help you resolve your issues.