Caring for an elderly loved one - attendant care expenses and nursing home fees

As family members age, you may need to consider whether obtaining care and assistance for your loved ones makes sense. The level of care can range from part-time assistance to full-time comprehensive care in a facility. Some individuals prefer in-home care whether it be from a family member or a hired attendant, while others consider facilities such as a retirement residence or nursing home. If you have already decided on the type and level of care, or are in the process of doing so, you may be unclear on the types of tax credits available and how to maximize your tax relief to help with the cost of care. This article will explain the key non-refundable tax credits available with respect to attendant care expenses and nursing home fees. While we will focus on the primary federal tax credits in this article, you should note that the provinces and territories provide similar tax credits (with varying amounts and thresholds depending on your province of residence).

Medical Expense Tax Credit

The Medical Expense Tax Credit (METC) is a non-refundable tax credit that allows you to claim eligible medical expenses that you incur for yourself, your spouse, or your children who were under 18 years of age and dependent on you for support. Note that any reference to spouse in this article also includes common-law partners. The METC is calculated as 15% of eligible medical expenses, paid within any 12-month period ending in the year, that exceeds the lesser of $2,352 for 2019 and 3% of your net income. In the year of death, the period for which medical expenses are eligible for credit increases to any 24-month period inclusive of the date of death.

In addition, you can claim medical expenses for a dependent relative (other than your spouse or dependent children) including your parent or your spouse's parent, grandparent, adult-age children or grandchildren, brother, sister, uncle, aunt, niece, or nephew if they were a resident in Canada at some point during the year. In this case, the annual amount that you may claim for each person in this group is limited to the eligible amounts paid in excess of the lesser of 3% of the dependant's net income and the threshold amount of $2,352 for 2019. A separate calculation of eligible medical expenses must be prepared for each dependant relative that you support.

Eligible medical expenses can include amounts paid for medical or dental services, therapy, medications, and private health insurance premiums as well as attendant care expenses and nursing home fees. Note that if medical expenses have been reimbursed by an insurance plan, you can only claim the portion of expenses that were not reimbursed.

Disability Tax Credit

Similar to the METC, the disability tax credit (or “disability amount”) is also a non-refundable tax credit used to reduce income tax payable on your income tax return. The disability tax credit is determined by multiplying the lowest personal tax rate of 15% by $8,416 for 2019, resulting in a $1,262 disability tax credit. The disability amount is generally available when an individual has Form T2201, Disability Tax Credit Certificate certified by an authorized medical practitioner as having a severe and prolonged impairment in physical or mental functions, and approved by the Canada Revenue Agency (CRA). It is intended to provide a credit for non-itemized disability-related expenses including certain attendant care expenses. Unlike the medical expense tax credit, the disability amount is only available to eligible individuals and is not based on actual expenses that have been incurred. Where the person with a disability cannot use all or part of the disability tax credit, the unused portion may be transferred to a spouse, or to a supporting individual including a child, grandchild, parent, grandparent, brother, sister, aunt, uncle, nephew, or niece. You should note that the person with the disability must be a resident in Canada at some time in the taxation year.

Attendant care

Attendant care is care given by a person who performs personal tasks that the individual is unable to do for themselves and may include meal preparation, maid and cleaning services, transportation, personal services such as banking and shopping, and companionship. However, if a person is employed to only provide a single service, such as maid and cleaning services, such services would not be viewed as attendant care. Note that from a tax perspective, an attendant cannot be the spouse of the payer or under 18 years of age at the time of remuneration. However, the attendant can be the spouse (or other relative) of the patient who is not the payer as long as the attendant is over 18 years of age. In addition, receipts for payment issued by the attendant needs to include their social insurance number.

In-Home care

Where an individual hires an attendant for assistance at home, the cost of one full-time attendant may be eligible for the METC. The courts have defined remuneration paid to “one full-time attendant” to mean the total remuneration paid to any number of attendants in the period as long as the total remuneration claimed only covered the services of one attendant at any given time.

In order to make this claim, the individual needs to either qualify for the disability amount or has been certified by a medical practitioner in writing that the individual is, and in the foreseeable future, will continue to be dependent on others for his or her personal needs and care.

In addition, if the individual qualifies for the disability amount, the taxpayer has two options:

1. claim the disability amount and up to $10,000 of the salaries and wages paid for attendant care (or $20,000 in the year of death) in calculating the METC; or
2. claim the full amount of the salaries and wages paid for attendant care in calculating the METC but do not claim the disability amount.

You should determine which of these two options provides you with a higher total tax credit.

Where the individual only hires a part-time attendant, the attendant care claim for purposes of the METC is limited to $10,000 of the expenses (or $20,000 in the year of death), and the individual must qualify for the disability amount.

Note that an attendant hired to provide in-home care is generally considered to be an employee and as such, the individual who hired the attendant would need to make the necessary payroll deductions and remittances to the CRA. For purposes of claiming the METC, in addition to the salary paid to the attendant, the employer's portion of the employment insurance premiums as well as Canada or Quebec Pension Plan contributions also qualify.

Care in a retirement home

Where an individual resides in a retirement home, the salaries and wages paid to employees who perform certain tasks such as food preparation, housekeeping for the resident's personal living space, laundry services, health care, and transportation can be claimed as care expenses for purposes of the METC provided that the individual qualifies for the disability amount. It is important to note that other expenses such as rent, food, and salaries paid to administrative employees cannot be claimed as medical expenses. As such, specific expenses must be separately identified on the retirement home invoice.

Similar to the attendant in home scenario described above, the individual has the same two options to consider when making a claim for the METC and/or disability amount. Let's look at an example:

Susan is 68 years old and lives in a retirement home. She earned $45,000 of pension income in 2019 and has an approved Form T2201. She paid $38,000 to a retirement home for 2019 with the following breakdown:

With the exception of rent and her share of administrative staff salaries, the remaining expenses totaling $20,000 represent eligible expenses for purpose of the METC. In making her claim for tax purposes, Susan has two options.

Under option #1, she can claim the disability amount and up to $10,000 of the salaries and wages paid for attendant care in calculating the METC. This means that a disability tax credit of $1,262 (i.e. 2019 threshold of $8,416 x 15%) plus an METC of $1,298 (i.e. 15% x ($10,000 - $1,350 (3% net income of $45,000 = $1,350 which is less than the 2019 threshold of $2,352))) is available. The total non-refundable tax credits amount to $2,560.

Under option 2, she can claim the full amount of the salaries and wages paid for attendant care as a medical expense as long as she does not claim the disability amount. In this case, her METC is $2,798 (i.e. 15% x ($20,000 - $1,350)).

For Susan, option 2 yields the higher tax credit and as such, she should forgo the disability tax credit so that she can claim the full amount of eligible expenses for purposes of the METC.

Nursing home or similar full-time care facility

A nursing home is generally an establishment that provides full-time maintenance or nursing home care for patients who are unable to care for themselves. This type of living situation implies that the individual requires constant care and attendance because of a severe and prolonged mental or physical impairment. In order to make a claim for METC purposes, the individual needs to either qualify for the disability amount or has been certified by a medical practitioner, in writing, that they are dependent on others for personal care needs now and in the foreseeable future.

Where an individual resides in a nursing home, generally the entire amount paid for full-time care in the facility may be claimed for purposes of the METC as long as the disability amount is not claimed for the individual. Eligible expenses include regular fees for food, accommodation, nursing care, administrative fees, maintenance fees, and social programming and activities fees. However, additional personal expenses such as hairdresser fees are not eligible.

In addition, where an individual in full-time nursing care has supplementary attendants, the salaries and wages paid to the additional attendants up to $10,000 (or $20,000 in the year of death) may be claimed for purposes of the METC, in addition to the nursing home fees.

It is important to recognize that the CRA generally views that a retirement home does not provide the care required to be classified as a nursing home. This distinction is important because it affects the type and amount of care expenses that may be claimed for purposes of the METC (as described in the two different sections above). Where a facility provides different levels of care, the facility would be considered a nursing home only in respect of the portion of the facility that provides a level of care comparable to that of a nursing home.

Reference Chart

Below is a useful chart that we re-produced from the CRA's guide, RC4065, Medical Expenses. It summarizes the various situations where certain expenses can be claimed for the purposes of the METC and whether the disability amount can also be claimed. It also lists the type of certification required in order to make the claims.