Double Dipping Allowed: Home Modification and Medical Expensees

Is the tax system doing enough to recognize the real and increasing costs of elder care? You may be surprised at the answer as we conclude our analysis of the question this week, reviewing tax credits available to the vulnerable and their supporting individuals.

Medical Expenses. For dependants other than your immediate family, these costs may be claimed for the same 12-month period as the expenses for the nuclear family. In this case, however, taxpayers use the dependant’s net income in determining the reduction of expenses based on 3% of net income. If the disabled person’s income is low, this creates a better advantage. Eligible expenses include the following:

• Home Modifications. Incremental costs of building or modifying a new home for a patient who is physically impaired or lacks normal physical development, where those costs are incurred to enable the patient to gain access to, or be functional within, the home. However, the expenditure must not be of a type intended to increase the value of the home or that would not typically be incurred by someone who was not impaired.

• Driveway Alterations. Costs of alterations to the driveway of a residence of a person with a mobility impairment to facilitate access to a bus.
• Moving Expenses. For a disabled person to move to a more suitable dwelling, to a maximum of $2,000.
• Van Adaptations. The lesser of $5,000 and 20% of the cost of a van that has to be adapted for the transportation of an individual who requires a wheelchair, plus the cost of the adaptation.

Home Accessibility Tax Credit.  Starting in 2015, a new non-refundable tax credit will be available, computed as 15% of a maximum of $10,000 in costs incurred to make a home more accessible to the disabled. These costs can include those described above and both the medical expense claim and the Home Accessibility Tax Credit can be claimed for the same expenses. The value of the new credit is a maximum of $1500.

Disability Amount. Claim this first on the return of the disabled adult; if not needed, it can then be transferred to a supporting individual, including the spouse. For 2015, the disability amount is $7899, which translates into a real dollar saving of approximately $1185 federally, plus a provincial benefit.

Therefore, claiming the Caregiver Amount, the Home Accessibility Tax Credit and the Disability amount for a seriously ill dependant with little income who lives with you can bring real dollar benefits of approximately $3700 from the federal government if you owe federal taxes; more if you owe provincial taxes. If you need to leave your job to provide care to a loved one, and you have the required insurable hours in the last year, a further $13,624 is possible from EI. Finally, a claim for out-of-pocket medical expenses for your loved one may be possible, but that depends on net income and the amount of the claim. 

The Money Moral? The tax system will adequately compensate many people with taxable incomes for the cost of caring for their loved ones who are seriously ill. Visiting a DFA—Tax Services Specialist is a good idea when illness strikes, to decipher the rules.