Your filing situation in Canada looks a little bit different than that of other groups, given that you are a senior. Because you are eligible for a number of different tax benefits, including some that younger taxpayers are not. This indicates that there are more opportunities for you to reduce the amount of money that you owe in taxes. We know that putting together your tax return can be hard and confusing because there are so many extra credits and deductions that must be taken into account.
The following is a list of important considerations that you, as a senior citizen or retiree, can make when filing your taxes. As well as a list of the most important seniors’ tax credits that are currently available and that you may be eligible for when you file your taxes this year.
In Canada, do senior citizens have access to any tax credits?
Whether or not you can get one of the many tax credits available to senior citizens will depend on your tax situation right now. When it comes to filing your return, we will go over some of the more common options, but you should be aware that there may be other credits and deductions available to you in addition to those we list.
Medical Expenses
As you get older, medical costs can make up a big chunk of your overall spending. If you haven’t already been reimbursed for these costs, you can deduct them from your taxable income by claiming them as a deduction on your tax return.
You may be able to get reimbursed for a wide range of medical costs, such as doctor’s visits, the cost of prescription drugs, and even devices that help you live, such as hearing aids. When it comes time to file your tax return, certain home improvements, like air conditioning that helps improve the air quality in your home, can be deducted as medical expenses.
Be sure to look over the complete list of medical expenses that the CRA provides, some of which may be tax deductible while others are not. After you have submitted your tax return, make sure to keep all of your receipts and bank statements, as you may be asked to provide evidence for any expenses that you claim.
How Old Are You?
You are eligible for a tax credit that does not have to be repaid if you are 65 years old or older on the last day of the tax year.
Your annual net income must be less than $39,826, and the amount of the credit that you are eligible to receive is based on your annual net income.
Your adjusted gross income is $7,898 for your tax return for the year 2022. Because the only requirement for this credit is to reach a certain age, claiming it is one of the easiest tax deductions that Canadian seniors can get.
If you are eligible for the age amount but do not require it, you have the option of transferring all or part of it to your spouse or common-law partner if you do not use it yourself.
The Pension Amount Received
When you file your taxes, you may be able to claim a credit of up to $2,000 if you have reported qualified pension income on either line 11500, line 11600, or line 12900 of your return.
In the event that you are a resident of Quebec, you have the ability to make a claim for a provincial age amount on line 361 of your return TP-1.
Your pension or annuity income from a pension or superannuation plan, payments from an RRSP, or payments from splitting your spouse’s or common-law pension could all count toward your eligible income.
Consider whether it would be beneficial to divide or share the amount of your pension with your spouse or common-law partner. This is another option to consider. According to Larson, “If you are married or have a common-law partner, you may be able to shift pension income from one partner to another in order to reduce the amount of tax that your family must pay.”
You can get a better idea of how pension splitting and sharing might impact your situation by consulting the additional resources that we provide on the topic.
Credit for taxpayers with handicaps
You are eligible to submit an application for the Disability Tax Credit if you are 65 years old or older or if someone you know has a disability (DTC). This credit is designed to ease some of the financial burdens that come with making additional payments for disability-related expenses. The maximum amount that can be received for a disability in 2022 is up to $8,870.
Credit for Taxes Paid on a Home’s Accessibility
You can fill out an application for the Home Accessibility Tax Credit (HATC) if you have made changes to your home to make it easier to get around in. The Home Accessibility Tax Credit (HATC) is a non-refundable credit that can be used to pay for up to $10,000 in home improvement costs that make your home easier for people with disabilities to get into. For example, the Home Accessibility Tax Credit can be used to pay for the cost of installing a stair lift, making doorways wider, or adding wheelchair ramps. These are all examples of eligible expenses.
This credit isn’t just for people who are 65 or older. Family members who make these home improvements to care for an elderly person who lives with them can also claim this credit on their taxes.
Credits for taxes that are specific to a province
Seniors who have paid for improvements to their quality of life or ease of living in the current year are eligible for a number of provincial tax credits. Your eligibility is determined by the province or territory in which you currently reside.
For instance, the Ontario Seniors Home Safety Tax Credit can be claimed in the province of Ontario by families who have at least one member who is 65 years old or older. It includes everything from handrails in showers and walk-in bathtubs to non-slip flooring and automatic garage door openers, all of which are purchased to help improve the safety of the home and are covered under this policy. It’s a fantastic tax credit for seniors, and it gives you a good reason to commit to making those otherwise expensive but necessary home improvements. If you meet the requirements, you may deduct 25% of up to $10,000 in qualified expenses, with a cap of $2,500. The tax years 2021 and 2022 are eligible for this credit application.
Thanks to the Low Income Grant Supplements for Seniors program, it is possible to get a reduction in the amount of property taxes you have to pay if you are over the age of 65 and a resident of British Columbia, Canada. To be eligible for the Low Income Grant Supplement for Seniors, you must meet all of the following requirements:
To qualify for the senior citizen homeowner grant, your home must be worth more than $1,975,000 and you must have a net adjusted income of less than $32,000, which includes the income of your shared-income partner if you have one.
If you are over 70, you should investigate whether or not you are eligible for the senior tax credit. You could be eligible for a payment of $800 if you had a spouse on December 31, 2021, who was also qualified for the benefit, or you could be eligible for a payment of $400 if you were single on that date.
Pension from the Old Age Security (OAS) system
The Old Age Security (OAS) pension is meant to help Canadians who are 65 or older with their finances and is available to those who meet the requirements. It is typically based on how long you have been an adult resident of Canada, and the government will send it to you on a monthly basis as compensation for your residency.
If your annual income is higher than the threshold set by the government ($81,761 for 2022), you may be required to pay back a portion of your old age security pension to the federal government. This is what is commonly referred to as the Old Age Security Pension Recovery Tax or the OAS Clawback. This threshold amount shifts upwards or downwards on an annual basis.
There are a few different approaches that you can take to reduce the amount of money that you are responsible for repaying, such as the following:
- Dividing up one’s pension with one’s spouse
- Utilizing a Tax-Free Savings Account (TFSA) in order to earn a tax-free income is not
- Try to avoid making gains on investments before you reach retirement age.
On this page, you’ll find a list of the different ways you can cut down on the amount of OAS clawback you have to pay.
RRSP Income
Your income can be delayed by contributing to an RRSP during times when you are making the most money. The money that you put in and that you earn through participation in this plan will not be subject to taxes until you withdraw it.
When you retire, the value of your RRSP and the amount of any other retirement income you receive all play a role in determining which of the many ways to generate income from your RRSP will be the most beneficial for you.
If you set up your own with the appropriate options, you can reduce the amount of money you pay in taxes while increasing the amount of money you have saved for when you are ready to retire.
You can turn your RRSP into income in a number of different ways, including the following:
- Establishing a Registered Retirement Income Fund, more commonly known as an RRIF
- Investing Money in an Annuity
- When the need arises, money can be withdrawn from the RRSP
Your current financial situation is the most important thing to think about when deciding between an annuity and an RRIF and when the best time is to start taking money out of your savings. So, it would be best for you to think about all of your options before making a final choice.
