Canada: Understanding Caregiver Tax Credit Changes

Last Updated: June 30 2017
Article by John Oakey

Finance Minister Bill Morneau announced on March 22, 2017 that the federal government would simplify the existing caregiver credit, the infirm dependent credit and the family caregiver tax credit by consolidating the three credits into a new Canada Caregiver Credit.

The new Canada Caregiver Credit (CCC) will consist of the following components:

  • $6,883 in respect of infirm dependants who are parents/grandparents, brothers, sisters, aunts, uncles, nieces, nephews or adult children; or
  • A $2,150 supplement to one of the following personal credits:
    • an infirm dependent spouse or common-law partner if the individual claimed the spouse or common-law partner amount;
    • an infirm dependent if the individual claimed an eligible dependent credit; or
    • an infirm child who is under the age of 18 at the end of the tax year.

An individual must claim the CCC supplement ($2,150 for 2017) rather than the CCC if that individual also claimed an amount for an infirm spouse/common-law partner, infirm eligible dependant, or infirm child. Where doing so results in less overall tax relief than would be available if the full CCC ($6,883 for 2017) was claimed, a top-up will be provided to offset the difference.1

The CCC will be reduced dollar for dollar by the dependant's net income above $16,163 (in 2017). Two aspects of the old caregiver credit will not be carried forward under the new CCC:

  • the dependant will not be required to live with the caregiver to claim the new credit; and
  • the new credit will not apply to parents or grandparents who attained the age of 65 and are not infirm.

Other rules remain the same:

  • Only one CCC amount will be available in respect of each infirm dependant.
  • The credit can be shared by multiple caregivers as long as the total claim does not exceed the maximum annual amount.
  • Where a claim for an eligible dependant amount or spousal/common-law partner amount is made in respect of an infirm dependant, no other individual other than the individual who claimed the eligible dependant or spousal/common-law partner amount may claim the CCC in respect of that dependant.
  • An individual may not claim the CCC in respect of a particular person if the individual is required to pay a support amount for that person to their former spouse/common-law partner.

The CCC will apply to the 2017 and subsequent taxation years. The credit amount and income threshold will be indexed for inflation beginning in 2018.

These changes reflect federal taxation only. The provinces and territories calculate their own non-refundable tax credits based on provincial and territorial legislation. Some provinces that reference the federal caregiver credit (British Columbia, Saskatchewan and Yukon) will have to modify their legislation to deal with these federal changes. Other provinces and territories that do not refer to the federal caregiver credit may either modify their legislation or maintain the status quo. Ontario proposes to replace the provincial caregiver and infirm dependent tax credits with a new Ontario Caregiver Tax Credit (OCTC) beginning in 2017.2

The CCC will be a non-refundable tax credit that may be applied to reduce taxes. Any excess credit not necessary to reduce income taxes will be unusable.

To calculate the CCC, taxpayers claim the lesser of $6,883 on the one hand, and $23,0463 minus the dependant's net income on the other.

Example of CCC calculation:4

(A) Base amount  
  income threshold $16,163
  maximum amount $6,883
    $23,046
(B) Dependant's net income $18,000
(C) Line (A) minus (B) $5,046
(D) Maximum amount $6,883
(E) Canada caregiver amount – lessor of line (C) and (D) $5,046


Example of supplement calculation and top-up:5

  Example 1 Example 2 Example 3
Spouse or common-law partner amount
Base amount (with CCC supplement)
income threshold for spouse or common-law partner amount  $11,636 $11,636 $11,636
maximum supplement amount  $2,150 $2,150 $2,150
  $13,786</p> $13,786 $13,786
Less spouse or common-law partner's net income ($18,000) ($13,000) -
Allowable spouse or common-law partner amount
(if negative, enter 0)
- $786 $13,786
Canada Caregiver amount
  1. Base amount
     
       income threshold $16,163 $16,163 $16,163
       maximum amount $6,883 $6,883 $6,883
  $23,046 $23,046 $23,046
  1. Dependant's net income
($18,000) ($13,000) -
  1. Line (A) minus line (B)
$5,046 $10,046 $23,046
  1. Maximum amount
$6,883 $6,883 $6,883
  1. Canada caregiver amount – lessor of line (C) and (D)
$5,046 $6,883 $6,883
Canada Caregiver amount – Top-up      
  1. Canada caregiver amount from line (E) above
$5,046 $6,883 $6,883
  1. Spousal or common-law partner above
0 ($786) ($13,786)
  1. Top-up – line (F) minus line (G) (if negative, enter 0)
$5,046 $6,097 -

Example 1 – spouse's net income on line 236 equals $18,000
Example 2 – spouse's net income on line 236 equals $13,000
Example 3 – spouse's net income on line 236 equals $NIL

Footnotes

1 The top-up does not apply with respect to an amount claimed for an eligible dependant who is age 18 or under at the end of the year.

2 Introduced on April 27, 2017 – Bill 127, Stronger, Healthier Ontario Act (Budget Measures), 2017.

3 The income threshold of $16,163 plus the maximum amount of $6,883 equals the base amount of $23,046. Both the income threshold and the maximum amount are indexed starting in 2018.

4 Example provided by the Canada Revenue Agency – (questions and answers on) Consolidation of Caregiver Credits (http://www.cra-arc.gc.ca/gncy/bdgt/2017/qa01-eng.html).

5 Ibid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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