Tax Tips and Pits: Attendant care, nursing homes and the Disability Tax Credit

"Fees paid to a person or business to provide care in-home or at a residential facility may be considered attendant care expense..."

Canada Revenue Agency (CRA) allows taxpayers to deduct expenses not covered by medical plans and also offers credits to recognize medical hardship, and in some situations, the transfer of these amounts to supporting family members.

However, making a medical claim is a convoluted process that leads to one of CRA’s top reasons for reviewing tax returns so getting it right is important.

Two lesser known medical claims are for nursing home and attendant care expenses.  The former is obvious, the latter not so much.

Fees paid to a person or business to provide care in-home or at a residential facility may be considered attendant care expense if a person provides a doctor’s letter to CRA stating the person requires “long-term full-time care”.  The practical interpretation means the need for prolonged and regular care that may include meal preparation, house cleaning, and transportation in addition to typical caregiving services.

A person approved for the Disability Tax Credit (DTC) by default qualifies for the attendant care claim. To add some detail, the DTC is a non-refundable tax credit of about $8,000 used to offset the extraordinary cost – no receipts required – that surround a life debilitating issue.  CRA approves a DTC by medically diagnosed physical or mental condition that markedly restricts a person’s ability to perform basic activities of daily life.  The actual need for attendant care is not a requisite factor for the DTC, but nonetheless if a DTC is approved a person can claim attendant care costs.

If a person qualifies for claiming attendant care expense and also has an approved DTC, CRA has rules on what is claimable by the eligible person and what can be transferred. Here are two typical scenarios.

#1 – with a DTC, the eligible person claims the DTC and then CRA allows a maximum claim of $10,000 of attendant care expense, using only the amount needed to be non-taxable.  Any balance may be transferred to a live-in supporting person, or if totally disabled, to a supporting person living elsewhere.

#2 – with a DTC, the eligible person does not claim the DTC, nor transfer it. In this case CRA removes the $10,000 attendant care maximum and accepts the total attendant care expense as the claim, using only the amount needed to be non-taxable.  Any balance may be transferred to a supporting person to a maximum of $10,000.  That’s $10,000 for each supporting person.

Noteworthy for this second scenario is the claiming of nursing home expenses. Just as with attendant care, the total nursing home expense is claimed and only the amount needed to be non-taxable is used with the rest transferable.  However, CRA does not allow a DTC claim in combination with a nursing home claim so scenario one isn’t an option.

CRA does allow a claim for both attendant care and nursing home in combination, but without a DTC claim.  So three siblings supporting a parent with costs for attendant care and/or a nursing home of say $24,000, could each claim up to $8,000 as a medical expense on their tax return, although a receipt in each person’s name is necessary.

And don’t miss this point.  Receipting is critical to a successful claim, especially for anyone receiving a transfer.  The paper trail must be explicit in detail of services offered and specific on who paid it.  Also, a supporting person receiving a transfer must include on their tax return the eligible person’s name, social insurance number, date of birth and net income.

Email Ron Clarke at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.

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