Tax Tips for the 2021 Tax Year

As you get ready to file your 2021 taxes, make note that the deadline this year is May 2, 2022.

Each year we present BCRTA members a guide to help you make the most of your annual tax return. BCRTA does not offer income tax advice, but here are some common issues and deductions to keep in mind. Working through this list will help you complete your return to your maximum advantage. Our annual check list is put together by our Pensions and Benefits Committee. We start with the factors that apply to most retirees, then offer a few new items that may apply to you for the 2021 tax year.

Let’s get started!

Eligible Medical Deductions

Any eligible medical costs that you pay that exceed 3% of your net income can be deducted when you complete your income tax return this year. A couple usually should combine all medical expenses on one tax return – usually the one with the lowest income – to gain the highest value deduction.

  • Eligible medical expenses are those payments made by you or your spouse that were not fully reimbursed by an insurance plan. Some examples that you should explore:
  • Prescribed medications
  • Payments to a medical doctor, dentist, and most paramedical service providers such as physiotherapists, chiropractors, massage therapy, etc. You can review CRA’s complete list of medical expenses that may be eligible for tax deductions at this page on the Revenue Canada website..
  • Premiums that you paid for any health service plan other than MSP.
    • If you participate in our Johnson Insurance with Prestige Travel Plan you should receive a letter that itemizes your claimable premiums as well as your claims history that shows your eligible deduction. If you don’t see this by March 16, follow up with them.
    • If you participate in MEDOC and have requested a letter that shows the eligible amount of premiums in a previous year you should receive it soon. This year’s tax notices are scheduled to be sent out in February. If you are a MEDOC participant but have never requested this notice, call Johnson at 1.800.563.0677 and you will automatically receive one every year.
    • If you are signed up for Extended Health Coverage with Green Shield and premiums are deducted from your Teacher’s Pension Plan payments, GSC premiums are always shown in Box 135 of the T4 you received from TPP. See more about tracking GSC claims at https://www.bcrta.ca/gscclaims

BC Recovery Benefit and the one-time payment for people receiving Old Age Security and Guaranteed Income Supplement.

Both the BC Recovery Benefit and the Federal one-time payment for seniors programs have been closed. If you received either of these during the eligible period, remember that they are tax-free payments. You do not need to report them on your income tax form.

The Canada Caregiver Credit

The Canada Caregiver Credit (CCC) is a non-refundable tax credit that may be available to you if you support a spouse, common-law partner or a dependant with a physical or mental impairment. For detailed information visit https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/canada-caregiver-amount.html.

Disability Tax Credit

The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they pay. For detailed information visit https://www.canada.ca/en/revenue-agency/services/tax/individuals/segments/tax-credits-deductions-persons-disabilities/information-medical-practitioners/eligibility-criteria-disability-tax-credit.html.

Age tax Credit

If you were 65 or older on Dec. 31, 2020 you may claim an age tax credit. The credit is geared to income with the maximum discount for those whose income is less than $$38,508, and the credit is gradually eliminated as your income increases. There is a corresponding provincial tax credit as well. This deduction can also be transferred to a spouse. For detailed information visit https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-301-amount.html.

Seniors Renovation Tax Credit (BC)

We know that people who continue to live independently enjoy many benefits, but changes may be required to your residence to enable you to stay in your home. If you are a senior who has made modifications to your home for accessibility reasons you may qualify for the British Columbia Home Renovation Tax Credit for Seniors and Persons with Disabilities. Use form 5010-S12 Schedule BC(S12) to apply for this credit.

Source: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/credits/seniors-renovation

Charitable Donations

Tax credits are available for donations made to registered charities. In a spousal relationship, the claim can be split or attributed to either person to provide the greatest tax advantage. For detailed information see https://www.canada.ca/en/revenue-agency/services/charities-giving/giving-charity-information-donors/claiming-charitable-tax-credits.html.

Political contributions

Tax credits are available for any contributions you and your spouse made to registered federal political parties or British Columbia political parties. For more information about the federal credit visit https://www.canada.ca/en/services/taxes/income-tax.html.
For British Columbia credits go to https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/provincial-territorial-corporation-tax/british-columbia-provincial-corporation-tax/british-columbia-political-contribution-tax-credit.html.

Payment Options

If you are among the 16% of Canadians that owe tax after filing, you now can pay using a credit card, PayPal, or Interac e-Transfer (See Payments to the Canada Revenue Agency on the CRA website).

Sign up for Direct Deposit with your Revenue Canada account to receive your refund deposited into your bank account. Learn more, log in or register via this page on Revenue Canada’s website.

Other Options

You can now also file a return electronically on CRA’s website. You will have to register on the CRA website MY Account service to do this. Once you have registered, you can take advantage of CRA’s “Auto-fill My Return” Feature, which will speed up the entry of information.

Need Help Filing Your Return?

Using commercially available tax filing software can make the process of doing your taxes less stressful. With helpful calculations, guides and prompts regarding eligible deductions and required forms, using tax filing software will be, for most people, quicker and more accurate than traditional methods using a pen, paper and two pots of coffee. Many software offerings allow several filings on one license, meaning you can cover the people in your household with one purchase. A computer-literate relative might help. Filing as a household with your spouse is made easier, as most personal tax software automatically calculate the best tax-splitting options for couples. Another benefit is that programs will keep track of your filings for one tax year and provide continuity for future filing.

There are several low-cost or free tax filing programs available on-line. Search for “on-line tax filing.” A listing provided by CRA can be found by visiting https://www.canada.ca/en/revenue-agency/services/tax/individuals/community-volunteer-income-tax-program.html.

There are also many volunteer run tax preparation clinics at Seniors’ and Community Centers around the province.

CRA Scams

We always remind members that there are unfortunately a lot of fraudsters who try to take advantage of seniors by pretending to be a collection agency or government official. Often these are strange recorded calls, or sometimes it will be a person phoning you.

By being alert to fraud, you won’t fall for fake phone calls, e-mails or letters pretending to be from the CRA. Canada Revenue Agency will never contact you demanding your credit card number. If you receive one of these contacts, it is important to provide NO information.

To ensure that you are dealing with an authorized CRA representative, always follow up on any questions you have by calling 1-800-959-8281 or check your CRA My Account on-line.

Your Receipts

Make sure you have all your receipts before you file. That includes both income (T4 and T5) and medical and charitable expense receipts. It feels good to file, but don’t jump the gun and send in an incomplete tax filing. If you collect a pension from the Teachers’ Pension Plan but haven’t yet received your T4A form from the TPP, you can contact them at 1-866-876-8877.

 

New for the 2021 Tax Year

One-time Payment Program Produces Some Incorrect Tax Slips – Correction in Place

In 2021, the federal government issued a one-time payment for older seniors (born on or before June 30, 1947) to assist them with expenses incurred during the pandemic. Details about the program can be found at https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/one-time-payment-older-seniors.html

However, due to an administrative error, some recipients of the One-Time Payment for Older Seniors received an incorrect tax slip in which the payment amount of $500 was incorrectly entered into the document twice. All individuals who received an incorrect tax slip will be issued amended tax slips in time for the tax filing season, along with a letter explaining how to report the correct amount on their tax slip.

The tax slips available on the Canada Revenue Agency’s My Account for Individuals are correct. When completing your tax return, the correct information will be included if you are using “Auto-fill My Return”.

Delayed One-time Payment tax slips

Some tax slips for the one-time payment may be delayed up to the week of March 14, 2022.

No withholds

No taxes or deductions will be withheld from your $500 payment.

Source: https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/one-time-payment-older-seniors.html

Still Working? What You Need to Know About CPP Choices for 65-70 Year Olds

From age 65 to 70, an employee can elect to stop making further contributions to the CPP, by completing form CPT30 from CRA.  Once the form is completed, a copy must be given to the employer, and the original sent to CRA. The election would take effect on the first day of the month following the month that the form is filed with the employer, so cannot be backdated.  The first day that the form can be completed is the day that the employee turns 65, so CPP contributions are still made for the birthday month.

Source: https://ca.finance.yahoo.com/news/canada-revenue-agency-1-157-224551901.html

Digital News Subscription Credit

The digital news subscription tax credit is a non-refundable tax credit for amounts paid by individuals to a qualified Canadian journalism organization (QCJO) for qualifying subscription expenses after 2019 and before 2025. Individuals who have entered into an agreement with a QCJO for a qualifying subscription that is eligible, can claim the credit on Line 31350 of their T1 Income Tax and Benefit Return for the years 2020 to 2024.

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/deductions-credits-expenses/digital-news-subscription.html

Medical Expenses Refund Supplement

If your adjusted family net income is less than $54,146 and your employment income is above $3,751 or more, you may qualify for this supplement.

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-45200-refundable-medical-expense-supplement.html

Cryptocurrency Reporting

Many individuals are dabbling in Bitcoin and other “crypto”. There is a popular culture around cryptocurrencies such as Bitcoin that they live in a universe free of taxation and reporting. Not so. There can be serious penalties for those who do not report holdings. For example, see this article regarding the filing requirements for cryptocurrencies that are considered foreign property: https://www.taxtips.ca/filing/foreign-asset-reporting.htm#cryptocurrency-may-be-foreign-property 

OAS Clawback Changes

Revenue Canada institutes a “recovery tax” on your Old Age Security income when you cross a threshold of income. To see the current calculations, visit https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/recovery-tax.html

Canadian Dividends Versus Other Investment Income

It’s too late for this tax year, but if you have income streams from investments, this article explaining how Revenue Canada treats different forms of investment income might help you plan to structure your holdings in the future. See https://www.taxtips.ca/dtc/taxcomparisons/tax-comparison-senior-2021.htm

 

This content is offered to BCRTA members as general information, not financial advice. BCRTA recommends that you speak to a Certified Financial Planner for personalized advice.

Tax Credits That Help Caregivers

Oscar* would not disagree that 2020 was a terrible year. COVID-19 had effectively imprisoned him at home. Then Eleanor, his spouse, had been disabled by a stroke and now requires special care, including being confined to a wheelchair. Looking after her was taking a great deal of time, patience – and money.

According to the Canadian Institute for Health Information (CIHI), unpaid caregivers of seniors spend an average of 17 hours per week taking care of their elderly parents or relatives. If those seniors have dementia, their caregivers put in up to 26 hours per week – on top of their own everyday workload and routine.

Most caregivers also pay out of their own pockets for many of their loved ones’ necessities like prescription and over-the-counter drugs, transportation, specialized devices, rehab and sometimes even home renovations.

Oscar was looking for any ways to help relieve some of the financial challenges he was facing as a caregiver. With tax season now underway, his advisor suggested he could start by taking advantage of many of the non-refundable tax credits available for caregivers.

Tax credits reduce your tax bill dollar for dollar. For example, a tax credit of $200 will directly lower your tax bill by $200. Medical tax credits are non-refundable credits that will similarly reduce what you owe but will not result in a tax refund. These are meant to help even out the tax burden by allowing some relief for additional medical and disability expenses that most other taxpayers do not face.

Here are four non-refundable tax credits that may benefit Oscar:

1. Medical expense tax credit (METC)

The METC provides a non-refundable tax credit for “qualifying medical expenses” that exceed a certain threshold – the lesser of 3% of net income (line 23600), or $2,397 federal and $2,277 BC (2020). These include expenses like home care, medically required equipment, etc., for which you have not been reimbursed by a health insurance plan or in any other way. Oscar can also claim his own expenses for Eleanor’s care. For instance, if he took her to her dentist and paid $500, he could count the $500 he paid towards a claim for the METC.
Incidentally, this credit can also be used for the expenses of family, so you might be able to claim for those of your dependant spouse and children. You can also claim the credit for others who depend on you for support, such as adult children and grandchildren, as well as your parents or your spouse’s parents. They don’t even have to live with you as long as you paid medical expenses for them and they are Canadian residents who depend on you for financial support throughout the year.
Eligible medical expenses might include:

  • Payments to a health professional (e.g., dentist, nurse, pharmacist, optometrist, psychologist, counsellor, chiropractor, podiatrist, therapist, dietician)
  • Medical services not covered by insurance (e.g., laser eye surgery)
  • Medical services outside of Canada
  • Health aids or devices (e.g., prescription eyeglasses, wheelchair, hearing aids, crutches)
  • Prescription drugs or medications
  • Nursing home care and attendant services (just the cost of nursing care, not the cost for room and board)
  • Service animals
  • Ambulance fees
  • Wigs made for hair loss due to disease treatment

This is by no means the full list. Please access the CRA’s detailed medical expense page on their website where you will be able to search for any particular expense and find out whether you can count it as a medical expense on your tax return.

2. Disability Tax Credit (DTC)

As Oscar is taking care of someone who is dependent on him, and has a persistent physical or mental disability, he will be able to claim the non-refundable Disability Tax Credit (DTC).
To qualify for the DTC he will require:

  • A medical professional must complete CRA’s T2201 Disability Tax Form describing the nature of the disability and how it is a severe and prolonged impairment.
  • If approved by the CRA, Eleanor can claim her medical expenses if she has sufficient income. If she cannot use a portion of the credit to further reduce her income tax, Oscar can claim the disability amount as a “supporting person”.

Also, as Eleanor is financially dependent on Oscar, he may be able to transfer some or all her DTC to himself. Depending on his situation, he may have to choose between Eleanor claiming the DTC and transferring it to himself or counting the expense towards a claim for the METC.

Importantly, the successful approval of the DTC provides Eleanor herself with further access to many other forms of government assistance. It is an essential part of any disability financial support plan.

3. Home Accessibility Tax Credit (HATC)

Oscar had installed a $10,000 wheelchair ramp to the home last year, so he can claim the non-refundable Home Accessibility Tax Credit (HATC).
Intended for medically necessary home renovation, addition, or alteration, the 15% HATC is worth a federal credit of up to $1,500 per calendar year, per individual. To claim this credit (line 31285), the renovation must be made to help a senior or a disabled person age 65 or older who are already approved for the DTC. It is there to help make things easier for the care-receiver, whether it is gaining better access to a home, being more mobile within that space or reducing the risk of harm or injury.

In addition to a wheelchair ramp, Oscar might also claim items like the following:

  • grab bars
  • hand-rails
  • walk-in bathtub
  • wheel-in showers
  • widening doorways for wheelchairs
  • lowering cabinets
  • stairlift

The HATC does not apply to the cost of household appliances, housekeeping or gardening.

Many accessibility renovations also qualify as medical expenses, so parallel claims can be made for both the HATC and METC.

For BC residents, the Province also offers the 10% BC Senior’s Home Renovation Tax Credit of up to $1,000 per calendar year, per individual, so it may be possible to enjoy a triple tax credit.

4. Canada Caregiver Credit (CCC)

Oscar can prove that he provides food, shelter and clothing for Eleanor. A loved one, like Eleanor, with a handicap, injury or illness, and who depends on you for support, even if they live separately, is considered by CRA as an infirm dependant. This means the person you are caring for has some kind of physical or mental condition that prevents them from doing basic tasks or providing for themselves.

You are eligible for the Canada Caregiver Credit (CCC) whether it is your partner, child, grandchild, parent, sibling or other close relative, so long as they’re dependent on you as a caregiver, and you regularly and consistently provide them with some or all of the basic necessities of life. You can even claim this credit for taking care of your adult stepchildren or in-laws.
British Columbia also offers the B.C. Caregiver Credit to enhance the CCC. For 2020 it is a maximum of $4,791 and is reduced by the dependent’s net income in excess of $16,216 (2020).

To get a better sense of what you can claim as a caregiver and what lines on the tax form you need to fill out, check out the CRA’s web page on credits, deductions and expenses. Better still, consider working with an accounting or financial-planning professional to make sure you are correctly following the rules and getting the most from these credits.

Always be sure to keep all your receipts – you never know when you’ll be asked to produce them.

* Names have been changed.

 

About the Author

Michael Berton, CFP®, RFP®, CLU®, CHS, FMA is a Senior Financial Planner with Assante Financial Management Ltd. In Vancouver, (604) 678-3096. Michael has taught Financial Planning courses at BCIT and TWU. He has written for Advisor’s Edge, Advocis FORUM, and Advisor.ca. He is married to another financial planner, has three children and lives in North Vancouver. Always discuss your particular circumstances with a financial planner prior to acting on the information above.