Thinking About Retiring? Our Advice on Credits & Benefits Available to Canadians
It is essential for seniors to adopt a plan regarding taxes when planning for retirement. More than 1 in 5 working-age Canadians are between the ages of 55 and 64 – more than at any time in our history. With the impending retirement wave, retirement planning is on the minds of more Canadians than ever.
Have you started planning for it? If not, we’re here to help you plan for retirement and save money. In this article we’re going to share some helpful tax credits available for people who are retired or planning on retiring in Canada.
Let’s look at the available tax credits and benefits available to save tax in retirement and keep more money in your pocket.
Pension Income Tax Credit
The Pension Income Tax credit is available to you if you are 55 years of age or older. Basically, it enables you to deduct, from taxes payable, a tax credit equal to the lesser of your pension income or $2,000.00. This can save you $400 or more, per year, in taxes. The pension income tax credit is non-refundable and may not be carried forward each year. In other words, you need to use it or lose it.
If you’re 65 years or older at the end of the tax year, you can claim a non-refundable tax credit towards your federal taxes. To qualify, your net income must be less than $39,826, and the amount you may claim varies depending on your income. For your 2022 tax return, the age amount is $7,898.
Medical expenses Tax Credit
It doesn’t take long for medical expenses to add up. And those expenses can take a big bite out of your annual income. Fortunately, a portion of most medical expenses can be claimed on your personal income tax. There’s no maximum amount for this credit. However, it applies on 15% of the amount that exceeds the lesser of these two amounts: 3% of your net income (line 23600 of your tax return) or $2,397. You can claim the costs for prescription medication, costs paid out to health practitioners, nursing home fees, and medical insurance if you go on a trip. As with any tax deduction you wish to make, you need to keep all of your receipts. You will not need to submit them when you do your personal income tax, but if the CRA wants to see receipts and you can’t produce them, you won’t be able to make those claims.
Disability Tax Credit
To be eligible, a person must have a physical or mental impairment that is severe and prolonged (lasting at least 12 months). The maximum eligible amount in 2022 is $8,870, for a maximum credit of $1,286. Completing the Disability Tax Credit certificate, or T2201 Application form, correctly is essential in order to receive your Disability Tax Credit refund.
Home Accessibility Tax Credit
You may be eligible for this credit if you are aged 65 or over or if you are entitled to the disability tax credit. If you’ve made improvements to your home to make it more accessible, then you can apply for the Home Accessibility Tax Credit (HATC).
The HATC is calculated by applying the lowest personal income tax rate (15% in 2022) to an amount that is currently the lesser of $10,000 and the eligible expenses in respect of an eligible dwelling for the taxation year. The taxpayer may claim a tax credit of up to $1,500.
Canada caregiver credit
Do you support a spouse or common-law partner, or a dependant with a physical or mental impairment? The Canada caregiver credit (CCC) is a non-refundable tax credit that may be available to you. For your spouse or common-law partner, you may be entitled to claim an amount of $2,350 in the calculation of line 30300. You could also claim an amount up to $7,525 on line 30425.
For seniors with a modest income, you may be eligible for the GST/HST credit. For you to be eligible for this credit, you need to file your income tax returns including for those years that you did not receive any income. Remember that this credit is only available for one spouse or common-law partner so both of you cannot claim HST/GST. The credit will only be paid to the person who made the claim first and the amount is usually the same regardless of the person who gets it.
As you grow older, you get to enjoy a wide range of tax benefits. Partnering with the right tax accountant can help you identify all the opportunities to enjoy tax benefits that are often not available to the younger taxpayers. To make sure you’re not missing out on potential deductions and claims, contact us today!