Here’s how the caregiver tax credit changes

Tax Expert If you care for and support a family member, the tax system currently provides three potential caregiver nonrefundable credits you may be eligible to claim on your 2016 tax return: the infirm dependant credit, the caregiver credit and the family caregiver credit. These credits are intended to compensate you for part of the nondiscretionary, out-of-pocket expenses that caregivers often incur, but the rules are complex and confusing.

Fortunately, last month’s federal budget announced, for 2017, a significant simplification and consolidation of these three non-refundable credits, into one: the new Canada Caregiver Credit. Let’s review the current rules and then see what’s changing going forward.

Last month’s budget simplifies the existing system of tax credits for caregivers by replacing all three existing credits with the new Canada Caregiver Credit (“CCC”). According to the government, the new credit “will be better targeted to support those who need it the most and extend tax relief to some caregivers who may not currently qualify due to the income level of their dependant. It will provide tax assistance to caregivers for dependants who have an infirmity and are dependent on the caregiver for support by reason of that infirmity.”

For 2017, the CCC amount will be $6,883 for infirm dependants who are parents/ grandparents, brothers/sisters, aunts/uncles, nieces/ nephews, adult children. The amount will be $2,150 for an infirm dependent spouse or common-law partner, an infirm dependant for whom the individual claims an eligible dependant credit, or an infirm child under age 18. These amounts are consistent with the amounts that could have been claimed for 2017 for these dependants under the current caregiver credit and family caregiver tax credits above, adjusted for inflation for 2017.

The CCC will be reduced dollar-for-dollar by the dependant’s net income above $16,163 (for 2017) and the dependant will not be required to live with the caregiver in order for you to be able to claim the new credit; however, notably, the CCC will no longer be available for noninfirm seniors who live with their adult children.