Here is a question recently sent to me by Isabelle. “My mother, aged 78, lives alone with a very limited income, around $20,000. My partner and I regularly contribute to his quality of life, for example by paying for private health care. We also pay more and more of his personal expenses in order to allow him to maintain a certain standard of living, considering the rising cost of living. This makes us happy, but the annual sum is substantial. I would like to know if these forms of financial aid qualify for a tax reduction like with charitable donations? »
My intuition tells me that Isabelle’s question will resonate with many of you readers. The situation that our reader describes actually overlaps with the reality of a growing number of families.
Quebecois.
Normally, financial conditions improve from one generation to the next. It is statistically likely that you have a higher level of education and/or income than your parents. This is what we call the sandwich generation. Combined with the increase in the cost of living, and particularly the cost of housing, a parent’s lack of preparation for retirement has an impact on children’s finances. They must then support them, very often by still having children in their care or by having just left this crucial stage of life.
Unfortunately for Isabelle, hard cash donations made to a parent in need do not benefit from the same tax treatment as philanthropy. She should know that financial support exists for caregivers, but these programs or credits require qualification according to specific criteria or for well-targeted forms of assistance. Here is a list of those who would benefit from being better known.
Employment Insurance caregiver benefits. If you have to take time off work to provide care to a seriously ill or dying person, these benefits are for you. Benefits are based on employment income, up to a maximum of $668 per week, and the number of weeks varies depending on whether it is an adult, a child or a working adult. end of life.
Caregiver credits. At the federal level, this is a non-refundable tax credit that you can benefit from only on the tax payable if you take care of a spouse, a common-law partner or a dependent. who suffers from a physical or mental disability. Provincially, a credit also exists if the person does not have an impairment, but must live with you.
Non-refundable tax credit for home accessibility. This credit allows you to claim up to $3,000 for renovations or home accessibility work, as long as you live with the person you are helping (maximum $20,000 per year).
Registered Disability Savings Plan (RDSP). This is a plan that provides financial support for loved ones suffering from a serious and prolonged impairment. But like the RESP, the tax advantage is for the beneficiary, and not for the subscriber.
This does not apply to Isabelle’s case since her mother, although aging, is not losing her autonomy and is not suffering from a deficiency. However, she can claim the credit for medical expenses by keeping receipts for the care incurred for her mother. It’s always better than nothing, knowing that these can be important.
It can be worrying to see your own parents in need, not to mention the financial and mental pressure that this situation can cause. Do not hesitate to contact a financial planner, if necessary, to determine more precisely your financial capacity to support your loved ones without compromising your own financial security.
In closing, here are some reflexes that can also be developed if you wish to support your aging parents with their personal finances.
Check their tax return. Make sure that they receive all the benefits to which they are entitled, such as the Old Age Security Benefit (PSV) and the Guaranteed Income Supplement (GIS), the Régie des rentes du Québec (RRQ) or even benefits veterans.
Identify relevant tax credits available to seniors. We are thinking here of credits applicable according to the age or status of a person living alone, for example. It is also important to keep all receipts for medical care and medications that your parents pay for.
Target daily support measures. You could support your parents in finding services and non-profit organizations that provide services to seniors, such as meal delivery or home help subsidies.
Optimize their taxation. If your parents have pension or pension income, you should confirm that this is split on their tax returns.
Finally, even if your parents do not request any financial support from you, you can offer them your support in the management of their investment portfolio, for example. Is it composed and managed in such a way as to combine income and growth? Would your parents benefit from transforming part of their investments into a life annuity? Is their cost of living adequate in relation to their accumulated assets? In many cases, your financial literacy could be a great gift to give not only to your children, but also to your parents.