This may be the last thing you'll think of…
This may be the last thing that you'll think of, when your family members are ill. But there may be some tax relief that you and your family can get.

By Anne Chun, C.A., CFP
Originally published in Forever Young

The weather has started turning cold and I can feel the dampness in the air. As I started to prepare ABC Corporation's tax returns, Jane, a long time client called me on this dreary day and sounded drearier herself.

Her 85 year-old mom, Doris, suffered a stroke last weekend and has been in the hospital. Doris has to go to physiotherapy and cannot walk on her own two feet yet. The doctor has reservations about Doris moving back to her condo because she lives by herself. Jane is contemplating either moving her mom in to live with her for a while, or moving her mom into a retirement residence that offers medical care. She wanted to get my input.

I told Jane that I'm not a medical doctor and can only give her some tax and financial planning ideas. Before making a decision, she should discuss the pros and cons with her mom and her doctor.

From the financial planning perspective, Jane and her mom should find out what are the costs of the retirement residence. In most cases, besides the rental cost of the apartment, there may be other charges. As for moving in with Jane and her own family, the issues include whether there is enough space and whether any modifications are required. Another option, if Doris' physical condition will improve, is to have someone stay with her in her own condo.

For each of the three options, there is some tax relief available.

Option 1- Doris moves back to her own condo

*If she hires someone to look after her full-time, she may be able to claim an Attendant Care Expense. Under proposed legislation, Attendant Care Expense is to be replaced with a broader Disability Supports Deduction.
*This deduction is available to those who are employed or carry on a business or to attend a designated educational institution.
*If Doris does not qualify for the deduction, the expenses can be claimed as a Medical Expense Tax Credit by Jane.
*Doris may qualify to claim the Disability Tax Credit herself. Her doctor has to certify that her impairment is "severe and prolonged" and that she is "markedly restricted" in one of the stated basic activities of daily living (such as walking).
*If Doris qualities for the Disability Tax Credit, she can claim expenses for part-time attendant care.

Option 2 - Doris moves in with Jane and her family

  • Jane may be able to claim the Caregiver Tax Credit for providing home care to her mom. Doris' net income has to be less than a threshold amount ($16,705 for 2004).
  • Amounts paid by Jane to learn to care for her mom can be claimed as a Medical expense tax credit.
  • If Doris qualifies for the Disability Tax Credit, but her income is too low to make use of it, this credit can be transferred to Jane.
  • Jane may also claim, up to a maximum of $5,000, payments to adapt a vehicle (as prescribed by a medical practitioner) to transport Doris and reasonable costs to alter or renovate her home.

Option 3 - Doris moves into a retirement residence

  • Part of the costs may be claimed as rent for the Ontario Property Tax Credit.
  • If she requires attendant care, this may be deducted as the Disability Supports Deduction or as a Medical Expense Tax Credit, but not both.
  • If Doris claims more than $10,000 of expenses for attendant care, no one can claim the disability amount (Disability Tax Credit).

"Time out, time out please" Jane said. "I have to make an appointment to see you so you can take me through these tax deductions one by one."

"Yes, it can get complicated and it would be better if we meet to discuss the options." I said.

When your loved ones are sick, you may not be thinking about tax relief, but it pays to look into it.