Easy Tax Tips for Seniors: How Retired Canadians Can Save More

Filing your personal income tax returns can be frustrating and time consuming. While a Canadian income tax calculator is a popular way for people to estimate how much of a tax refund they'll get or how much they'll owe, it doesn't provide any insight into Canada's confusing tax code.

If you're a senior, though, there are a number of income tax credits and income tax deductions you can take advantage of that could help you save thousands of dollars every year. That means less money going to the Canada Revenue Agency (CRA) and more money staying in your pocket.

Below are some easy tax tips that can help seniors maximize their income tax returns in Canada.

Age Amount Credit

The age amount credit is a non-refundable tax credit that is available to Canadians who are, at the end of the taxation year, 65 years of age or older. The federal age amount for 2020 is $7,637, up from the 2019 age amount tax credit of $7,494. It works out to a 15% claw back on your federal tax.

Income Splitting with Your Spouse or Common-Law Partner

Income splitting is an excellent way for seniors to significantly reduce their taxes. To qualify, you need to be married or common-law in the current tax year, both be Canadian residents, and have received pension income in the year that qualifies for the pension income amount. In Canada, you're allowed to split up to half of your eligible pension income with a spouse or common-law partner. The person receiving the income can allocate part of that income to their partner. The tax savings can be quite significant if one spouse or partner has little income and the other has a lot. If your tax liability is reduced to $0, you can transfer any additional tax credits back to your spouse or partner and reduce their tax obligation.

senior woman working with tax papers

Split Your Canadian Pension Plan

Depending on how long you and your spouse or partner have been living together when you were contributing to your CPP, you might be able to split part of your retirement benefits. This can really cut down on the amount you pay in taxes if one of you is in a higher tax bracket than the other.

Medical Expenses

It doesn't take long for medical expenses to add up. And those expenses can take a big bite out of your annual income. Fortunately, a portion of most medical expenses can be claimed on your personal income tax. Seniors in Canada can claim medical expenses that are not reimbursed if they exceed 3% of their annual income. That's certainly easy to do. The CRA allows you to claim a wide range of medical expenses, some of which seem pretty obvious, others, not so much. You can claim the costs for prescription medication, costs paid out to health practitioners, nursing home fees, and medical insurance if you go on a trip. Less obvious income tax deductions include bathroom aids, devices that help you turn pages, and air conditioning. If you have to travel to get medical treatment not available where you live, you can claim some of the costs associated with transportation, meals, and accommodation. As with any tax deduction you wish to make, you need to keep all of your receipts. You will not need to submit them when you do your personal income tax, but if the CRA wants to see receipts and you can't produce them, you won't be able to make those claims.

Home Accessibility Tax Credit

If you are 65 years of age or older and have made changes to your home that improve your quality of life, you might be able to receive the Home Accessibility Tax Credit (HATC). The HATC is a non-refundable tax credit that can only be used to reduce your tax owing. It cannot be used to generate a refund. Still, the HATC allows you to claim up to $10,000 of home improvement expenses. Of any expenses you claim under the HATC, 15% comes back as a tax credit. The maximum tax reduction credit then would be $1,500. To qualify for the HATC, the renovation has to improve safety, allow better accessibility, and be permanent. Examples of expenses that qualify for the HATC include wheelchair ramps, walk-in bathtubs, wheel-in showers, non-slip bathroom flooring, hands-free water taps, the widening of doors, ergonomic door locks, and motion-censored lights. Expenses that you cannot claim include household appliances, entertainment systems, routine maintenance, and housekeeping costs.

Other Tax Credits

  • If you live in Ontario, are 64 years of age or older, and receive Ontario Trillium Benefits, you might qualify for the Ontario Energy and Property Tax Credit.
  • There is a similar tax available for Ontario seniors who own and live in their principle home.
  • Seniors can also apply for the Ontario Senior's Public Transit Tax Credit
  • British Columbia provides the Low Income Grant Supplements program for seniors, which reduces the amount of property taxes if you are 65 years of age or older. The grant is based on your income and the amount of property taxes paid.
  • In Quebec, you and your spouse can receive a grant of up to 70% of the rent costs from a private senior's residence. If you are a dependent senior, you can receive up to 80% of the cost.
  • FastnEasyTax.com, Helping Seniors Maximize Their Tax Returns

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