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 The
Money Management Newsletter: Taxes
and Estate Matters
Care decisions have tax consequences
It may be the last thing that you'll think
of when your family members are ill. But the decisions you make about
their care may well affect the TAXES YOU PAY
By Anne Chun, C.A.,CFP,
Money Management Newsletter, January 2006
The weather has started turning cold and I can feel the dampness in the
air. As I started to prepare ABC Corporation's tax returns, Jane, a long-time
client, called me on this dreary day and sounded drearier herself.
Her 85-year-old mother Doris had suffered a stroke and was in the hospital.
She was getting physiotherapy but the doctor had reservations about her
moving back to a condo where she lives by herself. Jane was contemplating
either moving her mom in with her for awhile, or moving her mom into a
retirement residence that offers medical care. She wanted my input.
I'm not a medical doctor and can only give her tax and financial-planning
ideas. From the financial-planning perspective, Jane and her mom should
find out the costs of the retirement residence. In most cases, besides
the rental cost of the apartment, there may be other charges. As for moving
in with Jane and her own family, the issues include whether there is enough
space and whether any modifications are required. Another option, if Doris's
physical condition will improve, is for someone stay with her in the condo.
For each of the three options, there is some federal tax relief available.
OPTION 1 - DORIS MOVES BACK TO HER OWN
CONDO
- If she hires someone to look after her full-time, she may be able
to claim an Attendant Care Expense. Under proposed legislation, the
Attendant Care Expense is to be replaced with a broader Disability Supports
Deduction.
- This deduction is available to those who are employed or carry on
a business or attend an educational institution.
- If Doris does not qualify for the deduction, the expenses can be
claimed as a Medical Expense Tax Credit by Jane.
- Doris may qualify to claim the Disability Tax Credit herself. Her
doctor has to certify that her impairment is "severe and prolonged"
and that she is "markedly restricted" in one of the stated
basic activities of daily living (such as walking).
- If Doris qualities for the Disability Tax Credit, she can claim expenses
for part-time attendant care.
OPTION 2 - DORIS MOVES IN WITH JANE
- Jane may be able to claim the Caregiver Tax Credit for providing
home care to her mom. Doris's net income has to be less than a threshold
amount ($16,705 for 2004).
- Amounts paid by Jane to learn to care for her mom can be claimed
as a Medical Expense Tax Credit.
- If Doris qualifies for the Disability Tax Credit, but her income
is too low to make use of it, this credit can be transferred to Jane.
- Jane may also claim, up to a maximum of $5,000, payments to adapt
a vehicle (as prescribed by a medical practitioner) to transport Doris
and reasonable costs to alter or renovate her home.
OPTION 3 - DORIS MOVES INTO A RETIREMENT
RESIDENCE
- Part of the costs may be claimed as rent for the Ontario Property
Tax Credit.
- If she requires attendant care, this may be deducted as the Disability
Supports Deduction or as a Medical Expense Tax Credit, but not both.
- If Doris claims more than $10,000 of expenses for attendant care,
no-one can claim the disability amount (Disability Tax Credit).
Anne Chun, C.A. CFP is the co-author of Planning
your Financial Future. You can access other articles by her via her Fiscal
Agents Advisor Profile.
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, Fiscal Agents Money Management Newsletter
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