Financial: The Tax Benefits of Supporting Aging Parents

If this is the year that you will be opening up your home to your aging parents, did you know that there are tax benefits of Supporting Aging Parents?

Good Record Keeping Can Help Save Money

The first thing that comes to mind when you bring an aging parent into your home is usually not the deductions you might get at tax time. You are probably more concerned about your parent's care and how you will adjust.

Taxes and paperwork are the farthest thing from your mind. But often, caring for an elder parent requires extra finances. With minimal record keeping, you can have some of those extra finances.

Record keeping can be as simple as keeping an envelope to slip medical receipts in when you get them and keeping a log in your vehicle when you make long distance medical trips.

So how much money can you save while supporting your elderly parent? Let’s try this example to illustrate:

Lily’s mother had a stroke and Lily had to move her mother into her home. The medical expenses including wheelchair, therapy and medication, amounted to over $3,000. Because her mother was under close supervision by a heart specialist, she had to travel to Vancouver six times during the year. Lily had to accompany her mother and they stayed overnight at a cost of $75 for each trip.
Lily’s mother moved out of her own home in order to come live with Lily. Moving costs were more than $3,500. When Lily’s mother moved into the house, Lily realized that she could not move her wheelchair into the bathroom so the door had to be widened. Rails also had to be put in the shower and the toilet area was changed for a total cost of $750.
Lily also had to get a contractor to build a ramp beside the stairs, so her mother could be mobile, for a cost of $2,000. Once Lily's mother lived with her for almost six months, Lily realized that the Ford Mustang she owned was not large enough. So she bought a Ford Windstar Van, which had to be adapted to accommodate her mother’s wheelchair, for a total cost of $35,000.

In total, Lily and her mother have spent a considerable amount of money. Lily makes $35,000 a year and is widowed. Her mother receives only Old Age Security and a small amount of other income for a total net income of $7,400.

Total expenses would be calculated as follows:

Medical
Total Expenses = $3,000

Travel/Transportation
Travel – 6 trips @ 120 km x .42 per km = $302.40
Meals – 2 x $33 x 6 = $396
Hotel – 75 x 6 = $450
Upgrade to minivan = $5,000
(20 percent of value or $5,000)

Household (Moving/Remodelling)
Moving – maximum = $2,000
Bathroom modifications = $750
Building ramp = $2,000

TOTAL EXPENSES = $13,898.40

Unfortunately, the transfer of medical expenses from elderly parents can be drastically reduced if they have any amount of income. This makes it very difficult for aging parents’ medical expenses to be transferred over to the supporting children, unless the parent is receiving virtually no income. This is often another good reason to distribute remaining assets to the children during their lifetime.

However, even if the medical expenses cannot be transferred, Lily can still save money just by claiming the caregiver disability credits transferred from her mother’s return.

The moral of the story: You may have more deductions than you realize. Even though a parent moving into your home can be a financially draining event for the family, by doing simple things, like saving receipts, you can save some money.

Mike Haines
Managing Partner
Stonecroft+Partners, Halton
1135 McCraney Street East, Unit 14
Oakville, ON L6H 3A3
905.849.3787
mhaines@stonecroftsolutions.ca
www.stonecroftsolutions.ca

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