11 Tax Credits and Deductions for Seniors in Canada
It’s a well-known fact that Canada’s income tax system is very complex. Part of the problem is that for decades, governments have piled on additional tax credits and deductions to reduce the tax burden on various population segments.
With so many tax credits, knowing what you can and can’t claim can be challenging. In this article, I’ll share 11 tax credits that Canadian seniors may qualify for. While the list is not exhaustive, it includes most of the common deductions and a few lesser-known ones, too.
Tax Credits for Seniors
Thousands of Canadian seniors save money each year by claiming one or more of the following income tax credits. Take a close look at the list to see if there are any you can claim.
If you are over 65 years old and your income is below $39,826, you can claim a non-refundable tax credit known as the Age Amount. For the 2022 tax year, the age amount is $7,898. You can transfer all or part of the age amount to your spouse or common-law partner if you qualify for the tax credit but don’t need to use it.
Pension Income Amount
If you received pension income that you reported on lines 11500, 11600, or 12900 of your tax return, you could claim a tax credit of $2000. The following types of pension income can qualify for the pension income amount: income from private pension or superannuation payments, RRSP income, or payments received from income splitting with your spouse.
Pension Income Splitting
If you reported income on line 11500 of your income tax return, you might be able to split the income with your spouse or common-law partner. To qualify, you and your spouse or common-law partner must have been residents of Canada on December 31, 2022. (If one individual passed away during the year, both spouses must have been residents of Canada on the date of death.)
Also, you cannot have been living separately and apart from one another due to a marital (or common-law relationship) breakdown at the end of the year and during the first 90 days of the year.
To elect to split your pension, both you and your spouse need to complete Form T1032, Joint Election to Split Pension Income. The transferring spouse would report the full income on line 11500 of their return, then claim a deduction for the amount they wish to split on line 21000.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit (HATC) is a non-refundable tax credit you can claim if you make your home more accessible through various improvements. The maximum expense you can claim is $10,000, and the tax credit is 15%. Therefore, the maximum tax reduction would be $1500.
Examples of accessibility improvements include a stair lift or a wheelchair ramp. If you are under 65 but have a senior residing in your home, you can claim the HATC if accessibility improvements were made to assist them.
Medical Expense Tax Credit
We recently published a post covering the various medical expenses that can be claimed as a tax credit in Canada. Canadians of all ages, including seniors, can claim many of the medical costs they incur under the Medical Expense Tax Credit, or METC.
If you have an eligible medical expense that exceeds the minimum threshold (the lesser of 3% of your net income or $2,479 for the 2022 tax year), you would report the amount on line 33199 of your income tax return.
The list of eligible expenses is a long one, too long to add here, but it includes expenses such as cancer treatment, laser eye surgery, essential medical equipment, and even travel expenses if you’re required to travel to receive medical treatment.
Click here for a comprehensive list of eligible medical expenses.
Disability Tax Credit
The Disability Tax Credit is a non-refundable tax credit designed to remove the financial burden from people struggling with a disability and those who care for them. The federal disability tax credit amount is $8,870 for 2022. Check out this article for more information on the Disability Tax Credit.
Federal political contribution tax credit
If you or your spouse or common-law partner made a donation to a federal political party, you can claim a tax credit. However, you can only claim the credit if you owe tax for the year, and the claim cannot be carried forward to a future year. If you can’t use the credit, your spouse can claim it on their return.
Other Common Tax Deductions and Credits
Here are some other popular tax credits and deductions that Canadian seniors may be able to use to lower their income tax owing.
Money that you contribute to a registered retirement savings plan (RRSP) is tax deductible. Seniors with available contribution room can contribute to an RRSP until the end of the year when they turn 71. At this point, they must convert any remaining RRSP balance to a registered retirement income fund (RRIF), even if they are still working. The maximum RRSP contribution limit for the 2022 tax year is the lesser of 18% of your annual income, or $29,210.
When you donate to a registered charity in Canada, you can claim the donation amount as a tax credit on your tax return. You’ll receive 15% on the first $200 you donate and 29% on the amount over $200. For example, if you donate $1000 during the year, you’ll save $30 in tax on the first $200 and $232 on the remaining $800, for a total of $262 in tax savings.
Climate Action Incentive (CAI)
Residents of Alberta, Saskatchewan, Manitoba, and Ontario can claim the Climate Action Incentive (CAI), a tax credit designed to offset the carbon tax fuel charges that increase the cost of gas. You can claim one credit per household.
Canada Caregiver Credit
If you provide support for a dependent with a physical or mental disability, you may be able to claim the Canada Caregiver Credit, which is a non-refundable tax credit.
Tips to avoid fraud in your CRA MyAccount
Unfortunately, fraud is more prevalent than ever before, and if you’re not careful, your CRA MyAccount can be compromised. Here are soman take to avoid getting scammed by someone posing as a CRA representative.
Use unique passwords for your online accounts: Whether it’s your online banking or CRA MyAccount, create a strong password and never use the same one on multiple online accounts. It’s also recommended that you change your password frequently.
Register for email notifications: The CRA will send MyAccount users an email notification whenever their address or direct deposit information is changed. If you receive an email notification and don’t recall making a change to your account, it’s best to contact the CRA immediately in case there has been a fraud attempt.
Login to your CRA MyAccount often: Many people only think to review their CRA MyAccount information once a year, at tax time. But it’s a good idea to log in regularly to ensure everything is as it should be. When fraud happens, the earlier you can detect it, the better. I recommend that people every quarter.
There you have it, 11 income tax credits and deductions you may be able to claim when filing your taxes this year. If unsure whether you will qualify for a specific credit, speak to an accountant or other tax professional. If you’re filing your own taxes, tax software programs like TurboTax or Wealthsimple Tax are equipped to identify tax credits you may be eligible for.