Potential tax-saving measures seniors should be aware of at tax time

As tax season approaches, it's essential for seniors to be aware of the various tax credits, deductions, and benefits available specifically to them. By understanding and utilizing these provisions, seniors can potentially reduce their tax liabilities and maximize their refunds.

I’ve written many times in the past about general tax tips and many of those tips will apply to seniors as well but here are some key tips tailored specifically (or more often) for seniors that they should be aware of:

1. Pension income splitting - If you receive eligible pension income, you may be able to split up to 50 per cent of this income with your spouse or common-law partner. This strategy can result in significant tax savings, especially if one partner is in a lower tax bracket. Eligible pension income typically includes life annuity payments from a pension plan and payments from a Registered Retirement Income Fund (RRIF). However, Old Age Security (OAS) and Canada Pension Plan (CPP) benefits are excluded from pension income splitting (but may qualify for pension sharing).

2. Age Amount Tax Credit - Seniors aged 65 and older may be eligible for the age amount tax credit, which can reduce the amount of tax owed. For each year, the maximum age amount is available to individuals with a net income below a certain threshold, with the credit being gradually reduced for incomes above this limit. It’s important to check the current year's thresholds to determine eligibility.

3. Medical expense deductions - Medical expenses can add up, and many are tax-deductible. Eligible expenses include prescription medications, certain medical devices, and premiums for private health insurance plans. Additionally, costs related to attendant care or nursing home fees may be deductible. Keep detailed records and receipts of all medical expenses to ensure you can claim them accurately.

4. Home Accessibility Tax Credit - If you've made renovations to improve the accessibility of your home—for example, installing grab bars, wheelchair ramps, or walk-in bathtubs—you may qualify for the Home Accessibility Tax Credit. This non-refundable credit allows seniors to claim eligible home renovation expenses up to a specified limit, helping to offset the costs of making homes safer and more accessible.

5. Disability Tax Credit - Seniors with a severe and prolonged physical or mental impairment may be eligible for the Disability Tax Credit. This non-refundable credit can reduce the amount of income tax owed. To qualify, a medical practitioner must certify the impairment, and an application must be submitted to the Canada Revenue Agency for approval. Once approved, the DTC can also open the door to other programs and benefits.

6. Canada Caregiver Credit - If you're supporting a spouse, common-law partner, or dependent with a physical or mental impairment, you may be eligible for the Canada Caregiver Credit. This non-refundable credit can help offset the added expenses of caregiving. The amount you can claim depends on your relationship to the person and their net income.

7. Guaranteed Income Supplement (GIS) - The Guaranteed Income Supplement provides additional income to low-income seniors receiving Old Age Security. To continue receiving GIS benefits without interruption, it’s crucial to file your tax return on time each year, even if you have no income to report. Timely filing ensures that your benefits are calculated accurately and disbursed without delay.

8. Beware of scams - Seniors are often targeted by tax-related scams. The CRA will never ask for personal information via email or text message. Be cautious of unsolicited communications claiming to be from the CRA, especially those requesting personal or financial information. If in doubt, contact the CRA directly using the contact information available on their official website.

9. Utilize free tax clinics - If you have a modest income and a simple tax situation, you may be eligible for assistance at a free tax clinic. These clinics, often run by community organizations in partnership with the CRA, can help you file your tax return accurately and on time. To find a clinic near you or to learn more, visit the CRA’s website.

10. Stay informed about provincial credits - In addition to federal tax credits and benefits, many provinces offer additional credits and programs for seniors. For example, some provinces provide property tax grants or credits to help offset the cost of property taxes for senior homeowners. Check with your provincial or territorial government to learn about any additional benefits you may be eligible for.

By staying informed and taking advantage of these tax credits, deductions, and benefits, Canadian seniors can effectively manage their tax obligations and potentially increase their tax refunds. It’s always a good idea to consult with a tax professional or financial planner to ensure you're making the most of the tax provisions available to you.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.