Simplifying Tax Credits for Caregivers: Understanding Changes from 2016 to 2017

If you were providing care and support to a family member in 2016, you may have been eligible for three non-refundable tax credits. This tax credit was designed to assist caregiver, including those taking care of injured relatives and family caregivers.

Caregivers often face expenses that cannot be easily changed, and these tax credits aimed to alleviate some of the financial burdens. However, the rules governing these credits were complex and challenging to comprehend.

In 2017, there was news of a new tax credit specifically tailored for caregivers. This significant development involved streamlining the three existing non-refundable credits into a single non-refundable credit known as the Canada Caregiver Credit. Understanding how the previous tax credit system operated will provide valuable insights into the changes implemented in 2017.

Caregiver Tax Credit

Understanding the Evolution of Caregiver Tax Credit: The Old System (2016 Returns)

Under the old tax credit system, which was applicable for 2016 returns, there were three distinct types of credits, each with its own specific requirements for both the caregiver and the dependent.

Dependent Credit for the Elderly:

For individuals providing financial assistance to a family member who doesn’t qualify as a spouse, civil partner, or spouse, but is physically or mentally disabled, a 15% non-refundable tax credit was available. The dependent did not necessarily have to live with the caregiver to qualify for the credit. The credit amount was capped at $6,788, and for every dollar earned beyond $6,800, the credit was reduced on a dollar-for-dollar basis. Once the income of the dependents exceeded $13,595, the credit was no longer applicable.


Navigating Caregiver Tax Credits: Overview of Different Categories

Caregiver Credit: Individuals responsible for providing home care to elderly parents, grandparents, or certain family members over 25 years old may qualify for this 15% non-refundable tax credit. To be eligible, the dependent family members must be financially dependent on the caregiver due to physical or mental disabilities. The maximum credit amount can vary between $6,788 and $4,667, depending on the condition of the dependent. The credit amount reduces dollar-for-dollar for every dollar earned above $15,940 and phases out completely when the individual’s household income reaches $20,607 or $22,748 for an infirm dependent.

Family Caregiver Tax Credit:

This non-refundable credit offers assistance to caregivers who are unable to care for a family member due to their infirmity. The credit amounts to 15% of $2,121. In addition to other dependent deductions in this category, the caregiver credit can be combined with the dependent of infirmity credit, dependent of an alcoholic or drug-dependent spouse credit, or dependent of an eligible dependent credit. Furthermore, a separate tax credit for family caregivers will be available to support infirm minor children, separate from the minor child tax credit that was discontinued in 2015.


Simplifying Caregiver Tax Credits: Introduction of the Canada Caregiver Credit (CCC)

In 2017, the implementation of the Canada Caregiver Credit (CCC) brought about a streamlined approach to caregiver tax credits, simplifying the existing system.

The government recognized the need for a more effective support program and introduced this new credit to assist caregivers. The CCC allows some caregivers who were previously ineligible for tax benefits due to their dependents’ income to receive aid, thereby providing tax assistance to caregivers responsible for supporting dependents.

Under the CCC, caregivers can claim amounts of $6,883 for infirm dependents, including parents, grandparents, siblings, aunts, uncles, nieces, nephews, and adult children. Additionally, a contribution of $2,150 per year is available for an infirm spouse or common-law partner.

To qualify for the dependent credit, the dependent must be infirm if the caregiver claims it for an infirm dependent under the age of 18 or a minor dependent under the age of 18. These provisions outline how the caregiver tax credit and family caregiver tax credit operated in 2017, with the credit amounts adjusted for inflation to align with the eligible claims for dependents during that year.


Eligibility and Benefits of the New Canada Caregiver Credit (CCC)

Eligibility for the New CCC Credit: To qualify for the new Canada Caregiver Credit (CCC), the dependent’s net income must exceed $16,163 in 2017. In such cases, the CCC will be reduced on a dollar-for-dollar basis. It’s important to note that seniors residing in their own apartments without availing the services of the CCC are no longer eligible for the program.

Rules and Application of CCC:

No changes have been made to other rules. Depending on the circumstances, only one CCC amount can be utilized to support an infirm dependent. Multiple caregivers caring for the same person can jointly apply for the credit, as long as the total claim for that dependent does not exceed the annual maximum allowance.

Caregiver Tax Credit
Examples of CCC Benefits:

The budget document provides two examples of how the CCC can benefit families. In the first example, a sister cares for her pregnant sister, who is unable to work and receives monthly social assistance of $14,000. Under the old system (2016), the caregiver was ineligible for tax benefits due to her sister’s high income. However, under the new CCC, she can claim $6,883, resulting in a tax saving of $1,032 compared to the previous year.

In another example, a wife takes care of her husband, who is unable to work and receives a disability benefit of $15,000 from the Canada Pension Plan. She could be eligible for $2,150 in tax relief under the new CCC, providing her with $323 in tax relief that she would not have qualified for otherwise.


Conclusion: Understanding the New Consolidated Caregiver Tax Credit

That concludes our overview of the new consolidated caregiver tax credit and its functioning. If you encounter any difficulties or have further questions, we recommend reaching out to the Canadian tax authorities. They can offer additional guidance and assist you in resolving any issues you may encounter.