Filing your taxes might be a nuisance, but you can take advantage of multiple senior tax credits in Canada to keep more money in your pocket, even as a senior.
While things like credit scores, personal loans, and debt repayment are likely concerns of the past, income taxes and government credits and benefits are a new priority. Read on to learn more about the senior tax credit in Canada, how to qualify, and how much you can claim.
Key Takeaways
- Canadian seniors can benefit from numerous federal tax credits like CPP, OAS, and DTC, as well as other specific provincial credits to help with other costs.
- Certain senior tax strategies such as pension income splitting, limiting RRSP withdrawals and carrying over charges and interest expenses can help reduce their tax obligation.
Federal Senior Tax Credits And Benefits In Canada
Once you reach the age of 65, you become eligible for a few tax benefits that weren’t available to you when you were younger. Along with tax benefits available to all Canadians, tax credits for senior citizens make a huge difference in helping retired Canadians save more money on taxes.
There is a wide range of tax credits and benefits available to Canadian seniors. Consider the following options when filing your taxes each year.
Canada Pension Plan (CPP) / Quebec Pension Plan (QPP) Benefits
Most Canadians contribute to the CPP throughout their working life. The CPP is a monthly benefit or credit that replaces a portion of your income when you retire. You must be at least 60 years old and have made a minimum of one valid contribution to the CPP to qualify.
The amount of money you can earn depends on a variety of factors. For the year 2024, you can receive a maximum of $1,364.60 per month, if you start your pension at 65. If you need to take out a loan, you can use your CPP to help you do so. To get a better idea about what you may be eligible for through the CPP, check out the Canadian Retirement Income Calculator.
It’s important to note that CPP income is never automatic – you must apply to receive it.
QPP For Residents of Quebec
Do note that CPP applies to individuals who work in provinces and territories outside Quebec. For individuals who work in Quebec, the QPP applies rather than the CPP. The QPP gives citizens living and working in Quebec basic financial protection if they retire, die, or develop a disability.
You can apply to QPP only if you live in Quebec, or if the last province you lived in was Quebec.
Retiring Allowance
Retiring allowances are sometimes included as a portion of a severance package, which is given to an employee upon termination of their employment. They can include the following:
- Payments for unused sick credits upon termination.
- Payments that are given to individuals upon the termination of employment or office, including damages, if there is evidence of wrongful dismissal.
A retirement allowance is calculated based on the length of your service with your organization. It may also include additional benefits, payments, and incentives. Depending on your situation, you may be able to transfer all or a part of the benefit to your RRSPs, allowing you to defer some of the taxes.
Disability Tax Credit (DTC)
The Disability Tax Credit (DTC) is a non-refundable credit that was introduced to reduce the amount of income tax that people with physical or mental ailments, or their family members, must pay.
Eligibility For The DTC
To be eligible for the DTC, proof from a qualified individual is required. They must declare that a severe mental or physical impairment is present and that it significantly impedes your ability to perform basic activities. Some examples of restricted activities due to disability include:
- Speaking
- Walking
- Hearing
- Eating
- Dressing
Applying For The DTC
To apply for the DTC, a medical practitioner must certify that you have a physical or mental impairment
You can apply for this tax credit any time of the year. To avoid any delays in your tax assessment, consider applying before your file your income tax return.
You can choose to apply using the standard paper form or via the digital form.
Applying via paper form:
- Fill out Part A of the updated Form T2201, Disability Tax Credit Certificate
- Print the form and sign it
- Give the form to your medical practitioner to complete Part B and sign the Certification section
- Submit the form to the CRA
If you need help completing your application, consider hiring a disability tax consultant.
Applying via digital form:
- Fill out Part A of the form online or by telephone
- Answer a few questions about your impairment
- Obtain a reference number and give it to your medical practitioner
- The medical practitioner will complete and submit Part B of the digital form online
- The digital form will be automatically submitted to the CRA
The form can be submitted either online through your CRA My Account, or by mail to one of the tax centres. The CRA will review your application and send you a notice of determination within 8 weeks, though it could take longer if there is any information missing.
How Much Can You Get?
The amount of money you can receive under the Disability Tax Credit is $9,428 if you’re at least 18 years old. Those who are 17 years and younger by December 31st can claim the disability amount of $9,428, plus the $5,500 supplement for children for a total amount of $14,928.
Medical Expense Tax Credit (METC)
The Medical Expense Tax Credit is available to individuals who pay significant amounts of money in medical expenses for themselves, their spouses, or dependents. Some examples of medical expenses that qualify include:
- Dental services
- Nursing home services
- Ambulance services
- Travel expenses
The cost of several medical devices may also qualify for the METC, including:
- Hearing aids
- Dentures
- Prescription drugs
- Orthopedic shoes
- Gluten-free foods
- Wigs
Home Accessibility Tax Credit (HATC)
The Home Accessibility Tax Credit applies to expenses related to renovations or alterations that make the home more accessible to those with mobility issues. Some examples of qualifying expenses include:
- Grab bars
- Handrails
- Walk-in tubs
- Widening doorways
- Lowering cabinets
The credit allows you to claim up to $20,000 in expenses per year for 2022 and later years, which typically works out to a non-refundable credit of $3,000 per year. For 2021 and earlier years, the maximum claim amount is $10,000 per year with a credit of $1,500 per year.
Eligible expenses include any work done by professionals such as plumbers, architects, and contractors, as well as building materials, fixtures, permits, and equipment rentals if you do the work yourself.
Check out how you can finance home renovations for your aging parents.
Old Age Security (OAS) Pension
The Old Age Security Pension is given to any Canadian over the age of 65 years old. A taxable benefit, this pension averages to about $713.34 every month for those between the ages of 65 and 74, and $784.67 for those aged 75 and over.
Guaranteed Income Supplement
The Guaranteed Income Supplement is given to some Canadians who also receive the OAS pension if their income is below a certain threshold. For example, if a single, divorced, or widowed individual’s income is below $21,624, they’re eligible for this supplement.
Allowance For The Survivor
The Allowance For The Survivor benefit is available to low-income, widowed Canadians between the ages of 60 and 64. Once you turn 65, this tax credit ends and is replaced with the Old Age Security Pension.
What Is The Age Amount?
The age amount is a non-refundable tax credit for Canadians aged 65 and older.
To qualify, you must:
- Have been at least 65 years old on December 31 of the previous year
- Earn a net income of less than $98,309
Provincial Tax Credits And Benefits For Seniors In Canada
In addition to the federal tax benefits described in the section above, there are also some province-specific tax credits available to seniors.
Ontario Senior Benefits
Only available to citizens in Ontario, the Ontario Trillium Benefit (OTB) combines three tax credits to assist in paying for energy costs and property taxes. To apply, you need to be eligible for at least one of the three combined credits:
- Northern Ontario Energy Credit
- Ontario Energy and Property Tax Credit
- Ontario Sales Tax Credit
British Columbia Senior Benefits
Available to British Columbia citizens, the Low-Income Grant Supplement For Seniors allows eligible citizens to supplement their homeowner grant if it’s been reduced or eliminated.
Quebec Senior Benefits
For seniors in Quebec, the government offers a basic payment to help cover the costs of home support services. To qualify for the benefit, recipients must be at least 70 years old and have lived in Quebec since December 31, 2023.
Check out these senior discounts available to Canadian consumers.
Tips On Reducing, Deducting, Or Deferring Your Taxes
Even as a senior, your income from tax credits and benefits is taxable. Here are some helpful tips for reducing the amount you pay in taxes.
Limit The Amount You Withdraw From Your RRSP
To avoid higher tax brackets, limit how much you take out each year based on your income.
Calculate how much income you receive through your employer’s pension plan, as well as the Canadian and provincial senior tax credits, to determine how much you can withdraw from your RRSP without falling into a higher tax bracket. This will help you avoid taking out more money from your RRSP each month, and in turn, avoid paying more taxes on it.
You may also want to consider converting your RRSP to a Registered Retirement Income Fund (RRIF). An RRIF is a registered account that provides an income from the savings and investments in an RRSP. Rather than putting money into an RRIF, you withdraw from it and use the funds throughout your retirement.
Pension Income Splitting
Pension income splitting can help you save on the amount of income tax you need to pay. Upon meeting a few requirements, you could be eligible to split a maximum of 50% of your income with your spouse or partner. This will reduce the amount of income tax you pay each year.
Carrying Charges And Interest Expenses
Remember to claim all carrying charges and interest expenses that you had to pay to earn any income from your investments. This includes expenses incurred for investment advice, as well as for paying anyone to manage your investments.
Final Thoughts
Retirement can be a financially stressful time for seniors because of a decrease in income. Make sure you’re well-informed on all the government benefits available and maximize your income and deductions on your income taxes.
Senior Credit FAQs
What credits and deductions can I claim as a senior?
- Pension income amount
- Age amount
- Pension income splitting
- Disability amount
- Canada caregiver amount
