Transitioning into retirement poses its own set of unique adjustments, one of which is how you file your taxes. As most seniors no longer have a steady source of full-time income, it’s important to ensure that you take advantage of all available tax credits for which you may be eligible. This article will aim to aggregate a variety of potential tax credits. However, it is by no means exhaustive, and you should still speak with a financial expert to learn more about your options.
Age Amount Credit
The age amount tax credit is a non-refundable tax credit that’s claimed on line 301 on your personal income tax return. As its name would suggest, this tax credit is available to those who are, by the end of the taxation year, 65 years of age or older. Further, you must have claimed a net income (line 236 of your return) of less than $85,863. Typically, the amount of the credit to which you may be entitled to could be reduced by 15 percent of your net income if it exceeds the $36,976 threshold. This is something a trusted financial advisor may help to determine your eligibility.
RRSP Contribution Credit
If you decided to set up a Registered Retirement Savings Plan (RRSP) during your working years, you may now have decided to withdraw funds in your retirement. For Canadians who are close to, or at the age of 71 and have RRSPs, there are a few tips to keep in mind. One thing to bear in mind, according to David Orbst, a professional chartered accountant at ORBST Quality Assurance Specialists: “you only have until the end of the year in which you turn 71 to contribute to your RRSP. If you don’t contribute the maximum eligible to your RRSP, including your RRSP carryforward amounts, you will lose the right to make any further contributions to the RRSP plan and you will lose the tax deductions as well.”
Medical Expenses Credit
Medical expenses can be a financial burden to anyone, however, as you get older and require more medical attention and care, these expenses can add up quickly and become quite costly. Generally, seniors are allowed to claim medical expenses that aren’t reimbursed if they exceed three percent of income. The CRA will typically allow you to claim a wide array of medical expenses, including typical medication and doctor’s fees. According to Orbst, you can accumulate medical expenses and corresponding receipts for “any 12-month period, not necessarily abiding by a full calendar year”. Regardless of your expenses, it’s vital that you keep all receipts so as to account for each cost. The CRA also offers a comprehensive online guide on eligible medical expenses that you can claim on your tax return.
The GST/HST credit is a tax-free quarterly payment made to individuals and families with low and modest incomes, in order to offset a portion of the GST or HST tax that they pay. Typically, an individual would receive the credit if their annual income was around $44,000 or less. As of 2014, the CRA automatically determines if an individual is eligible to receive the credit, and will send a notice of determination informing the individual of such. “Be sure to file your return every year,” says Orbst. This gives the CRA a better idea of who qualifies for the credit and who doesn’t. Typically, explains Orbst, “whoever files first in a family is usually the one to receive the credit for the household”. As with any tax credit, ensure you speak with a trusted family member or financial advisor to make sure you’re taking advantage of any and all tax credits available to you.
CPP/QPP Benefits & Private Pension Plans
As you get older and stop working, your income may be derived from a pension plan, such as the Canada Pension Plan (CPP), Quebec Pension Plan (QPP) — or a private pension plan. Amounts you receive under the CPP or QPP must be reported in your income, and you will receive a T4A(P) slip that shows the amount you received. You may decide to shift pension income from yourself to your partner, if they have a lower tax rate because of lower income. If you have a private pension, typically, you can transfer up to 50 per cent of eligible pension income to a spouse or partner. You may consider applying for these benefits once you have determined your eligibility using the CRA guidelines.
Home Accessibility Tax Credit
If you’re 65 or older and have had to invest in home renovations to make your home more accessible and improve your quality of life, you may be able to receive the non-refundable Home Accessibility Tax Credit. Under this credit, you may claim up to $10,000 for home improvement expenses, of which 15 per cent may be returned to you as a non-refundable credit. These expenses can include anything from wheelchair ramps, walk-in bathtubs, the widening of doors, non-slip bathroom flooring and motion-sensored light, amongst many others. Additionally, if a relative or loved one lives with you and supports you, they may also be eligible to receive this credit. Ensure you take the time to research this credit, and speak with a financial advisor to find out if you and your home are eligible.
You’ll want to ensure you’re best prepared for any financial curve ball retirement throws your way; as you move from retirement, to even an active senior living community, and beyond. There are many tax credits out there for which you may be eligible for now that you’re not receiving a full-time salary to help offset your cost of living. While the above list provides information on some of the most common tax credits available to seniors, it’s by no means comprehensive. You should ensure to conduct more research, and speak with a trusted relative and financial advisor who can outline your tax credit options and help you pursue the ones best suited to you.