Taxes are due in less than a week - it’s officially crunch time! If you haven’t already done so, it’s time to gather up those documents, give your accountant (if you have one) a call and crunch those numbers. If you’re a senior, you've got even more work cut out for you - there are a number of tax credits available to you that can potentially save you thousands of dollars - if you know where to look.
Always consider your tax credits
Some may be hesitant to claim certain types of tax credits, or don't realize that they can apply to them. A good example of this was recently published in the Toronto Star, when a writer shared that her father refused to claim credits while her mother was still alive, even though she was eligible for disability tax credits due to loss of eyesight and dementia. Once the writer became responsible for her father's finances, she revisited the credits - and after refiling, netted a $7,200 cheque for her dad.
Do you qualify for tax credits?
If you or your loved one suffers from a disability of sorts you may be eligible for tax credits too. According to the T2201 Tax Form under the line that needs to be filled in by a physician, “The effects of your patient’s impairment must be those which, even with therapy and the use of appropriate devices and medication, cause your patient to be restricted all or substantially all of the time.” In order to meet eligibility requirements, the applicant must fall into one or more of these Canada Revenue Agency categories:
- Vision
- Markedly restricted in a basic activity of daily living (such as hearing or mobility)
- Life sustaining therapy (such as kidney dialysis)
- The cumulative effect of significant restrictions (two or more significant restrictions which don’t, on their own, meet the criteria for markedly restricted)
Are you paying more than you should?
In addition to missing tax credits, seniors may also be ending up with a larger tax bill at year end than they anticipate. A recent piece in the Globe and Mail found that those who earn only CPP or Old Age Security premiums receive a surprise bill as their income is not taxed as it's paid out.
RRSP taxation
Those considering withdrawing funds from the RRSPs can also face a large bill after filing their return - but this can be avoided by opting into taxation from the start. Having tax withheld can make it more management to deal with losses from the taxed amount, rather than shelling out after filing a return - and avoid costly fees if the taxed amount is too high for prompt payment.
Income splitting
Another method seniors may use to lower their tax bills is income splitting, which allows partners to share income from pensions and annuities, resulting in a lower tax bracket.
According to the Canadian Revenue Agency (CRA), to qualify, you must be married (or common law) in the year of taxation, both be Canadian residents and received pension income in the year that qualifies for the pension income amount. The one receiving the income (the pensioner) can choose to allocate part of that income to their partner (the pension transferee).
For more information, check out the CRA's guide to pension splitting.
