Tax relief for sandwich generation
(Special) – By now most Canadians will have heard about the sandwich generation – those baby boomers in their 40s to 60s who are "sandwiched" between taking care of their elderly parents and their own children and, in some cases, even their grandchildren.
The strains of being a sandwich boomer are real. A recent survey by Credit Canada and Capital One Canada has found that almost two thirds of Canadians in this generation have become burdened with additional financial problems as a result of these added responsibilities and 55 per cent now expect to retire later than they previously thought so they can catch up financially.
"What's most concerning is the amount of expenses that this group of Canadians is being forced to take on at a time when they should be saving for retirement," says Laurie Campbell, executive director of Credit Canada.
The survey found that this group of Canadians are being forced to make a number of financial sacrifices including reducing vacations and eating out, dipping into savings, working more hours and cutting back on entertainment, social and other lifestyle activities to meet their obligations.
There is some good news, however, for this group of Canadians in the form of some new tax relief in the 2011 tax year.
Recognizing the sacrifices that many Canadians make to care for their children, spouses, parents and other family members with infirmities – often while caring for other family members and holding down a job – the government is introducing a new family caregiver tax credit.
It is a 15-per-cent non-refundable credit on an amount of $2,000, providing $300 in tax relief to caregivers of all types of infirmed, dependent relatives. Previously, the credit only applied to caregivers caring for parents, but it now has been expanded to include for the first time spouses, common-law partners and minor children.
The government estimates that more than half a million caregivers in the country will benefit from the new credit. Caregivers will be able to make a claim for an infirm dependent in addition to existing dependency-related credits such as the spousal and common-law partner credit, the child tax credit, the eligible dependent credit, the caregiver credit and the infirm dependent credit.
"There are a lot of people who will be able to take advantage of this," says Cleo Hamel, a senior tax analyst with H&R Block. "Most will already be getting other disabled credits, but it is an added claim that they can make."
The government also is improving the medical expenses tax credit by removing the $10,000 limit on the amount of eligible expenses that can be claimed to care for a financially-dependent infirmed relative.
Currently there is no limit on the amount of eligible expenses that a taxpayer can claim for themselves, a spouse or common-law partner, or a dependent child under the age of 18. However, caregivers who incur medical and disability-related expenses for an aging parent, sibling or other financially-dependent relative cannot claim expenses above $10,000.
As a result, some caregivers who incur extraordinary medical and disability-related expenses do not receive full tax recognition for these expenses. Effective in the 2011 tax year, the $10,000 limit will be removed.
Expenses can include home and vehicle renovations such as wheelchair lifts and ramps, widening doorways and the installation of walk-in bath tubs. By claiming $15,000 in expenses, for example, a caregiver now could reduce their income tax by $2,250 (15 per cent of $15,000) compared to only $1,500 (15 per cent of $10,000) previously.
Credit Canada and Capital One Canada recommend that sandwich boomers educate themselves about government and community programs available to help them with their new financial responsibilities, talk to a financial adviser, and avoid dipping into savings, because you never know when a family member might need a helping hand.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2012 Talbot Boggs
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