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2021 Year-End Tax Planning Guide for Family Members with Disabilities

December 21, 2021

Tax planning should be a year-round affair. But as year-end approaches, now is a particularly good time to review your personal finances and take advantage of any tax planning opportunities that may be available to you before the December 31st deadline.

As we enter the final weeks of 2021, here are some tax tips family members with disabilities should consider.

Make renovations for home accessibility:

The non-refundable Home Accessibility Tax Credit (HATC) assists seniors and those eligible for the disability tax credit with certain home renovations.

The tax credit is equal to 15% of up to $10,000 of expenses per year towards renovations that permit these individuals to gain access to or to be more mobile or functional within their home, or reduce their risk of harm within their home or from entering their home.

The HATC will apply in respect of payments made by December 31st for work performed or goods acquired in 2021. A single expenditure may qualify for both the HATC and the medical expense tax credit, and both may be claimed.

Contribute to a Registered Disability Savings Plan (RDSP):

RDSPs are tax-deferred savings plans available for Canadian residents eligible for the Disability Tax Credit. Up to $200,000 can be contributed to the plan until the beneficiary turns 59, with no annual contribution limits.

While RDSP contributions are not tax-deductible, all earnings and growth accrue on a tax-deferred basis.

Federal government assistance in the form of Canada Disability Savings Grants (CDSGs), which are based on contributions, and Canada Disability Savings Bonds (CDSBs) may be deposited directly into the plan up until the year the beneficiary turns 49. The government may contribute up to a maximum of $3,500 CDSG per year of eligibility, with a limit of $70,000 over the lifetime, and $1,000 CDSB per year of eligibility, with a limit of $20,000 over the lifetime. Note the assistance is also depends on the net income of the beneficiary’s family. Eligible investors may wish to contribute to an RDSP before December 31 to get this year’s assistance. There is a 10-year carryforward of CDSG and CDSB entitlements.

RDSP holders with shortened life expectancy can withdraw up to $10,000 annually from their RDSPs without repaying grants and bonds. A special election must be filed with the Canada Revenue Agency (CRA) by December 31 to make a withdrawal in 2021.

Pay family medical expenses:

A tax credit may be claimed when total eligible medical expenses exceed the lower of 3% of your net income or $2,421 in 2021.

For medical expenses, it may be worthwhile to look for unclaimed expenses prior to 2021 as well. The medical expense tax credit (METC) may be claimed for eligible medical expenses that were paid during any 12-month period that ended within the calendar year (extended to 24 months when an individual died in the year.)

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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