Getting older has its benefits. If you’re 65 years or older in the current tax year, you may be entitled to the age amount deduction. If you didn’t receive the age amount deduction last year, you may be wondering why you weren’t entitled. There are a number of reasons; for example, if your net income is above the limit ($82,353 at publication) or you ceased to be a resident of Canada, you’ll no longer be entitled. “I am occasionally questioned by clients as to why we did not claim the age amount tax credit on their behalf,” says Mark Goodfield, a chartered professional accountant in Toronto. “They are often quite surprised to find out that the credit is an income-tested amount and not an automatic credit like the basic personal amount credit.”
Do I Qualify?
You’ll qualify for the age amount deduction if you meet the following criteria:
- You are 65 years of age or older at the end of the tax year (i.e., December 31).
- Your net income is less than the maximum amount.
- You are a Canadian resident.
Your Income is Too High
Similar to Old Age Security, the age amount deduction is a means-tested tax credit with a clawback. That means your income has to be below a certain threshold to qualify. The age amount is targeted toward low- to middle-income seniors. If your net income is $82,353 or greater as of publication, you wouldn’t be entitled to the age amount deduction. If your net income is less than $35,466, you’d be entitled to the full age amount deduction of $7,033. If you earn above $35,466, but less than $82,353, you would be entitled to $7,033 less 15 percent of the amount of your income that exceeds $35,466.
You’re No Longer a Canadian Resident
You’ll no longer be entitled to the full age amount deduction if you moved outside Canada and ceased to be a resident for income tax purposes. If you became a non-resident partway through the year and meet the age amount requirements, you’ll be entitled to a partial credit. For example, if you moved to the U.S. on October 31, 2014 (you were a Canadian resident for 304 days in 2015) and your net income is less than $35,466, the age amount deduction will be prorated based on how many days you were a resident in Canada for the tax year. In this example, you’ll only receive an age amount deduction of $5,709 ($7,033 / 365 days x 304 days = $5,858).
Your Income Isn’t High Enough
Just because you meet all the requirements for the age amount deduction doesn’t necessarily mean you’ll receive the full amount. That’s because the age amount deduction is a non-refundable tax credit. Every resident of Canada is entitled to the basic personal amount ($11,327 at publication). The tax credit can only be used to increase your tax refund if your net income is greater than the basic personal amount. Low-income seniors with an income below the basic personal amount, for instance, wouldn’t benefit from the tax credit. Even if your net income isn’t high enough to benefit from the federal age amount, you may still qualify for the provincial amount. The basic personal amount for each province varies. Alternatively, you may be able to transfer the tax credit to your spouse if she qualifies: It’s for reasons like this that, even if you won’t benefit (or will only benefit partially) from this tax credit, you must always enter the full amount on both the schedule 1 and on the worksheet (to calculate the transfer properly, in this case).
References & Resources
- Canada Revenue Agency: Line 301 – Age Amount
- Mark Goodfield, chartered professional accountant, Cunningham LLP
- Anueing/iStock/Getty Images