3 Things You Can Do Now to Reduce your Spouse’s Long Term Care Fees
The tax slips have been trickling in and you are busy assembling your receipts for medical expenses and charitable donations. The time has come to prepare 2020 tax returns for you and your spouse. How you do this will determine to the penny what fees your spouse will pay for subsidized long term care (LTC) in the future.
Subsidized LTC care fees in British Columbia are based on two numbers as reported on the most recently assessed tax return of just the person in care – Net Income (line 23600) and Taxes Payable (line 43500). LTC fees will be 80% of the difference between these numbers.
If you want to pay less in care fees starting as early as next month, here are 3 strategies to use now when preparing and filing your 2020 tax returns:
- Always use pension splitting to move 50% of eligible pension away from the spouse in care to the spouse who is not.
- Report all or most of joint investment income (interest, dividends, capital gains, mutual fund income, etc.) on the spouse not in care.
- Report all medical expenses and charitable donations on the spouse not in care.
Married couples have long had the flexibility to choose who reports what income and who claims any tax saving credits. Under normal circumstances we can trust off-the-shelf tax software products or the services of professional tax preparers and accountants to use these options to our advantage by reducing taxes payable by possibly 5-10%.
In the case of an involuntary separation when one spouse goes into a care facility, however, the goal of saving income tax filing must be set aside in favour of managing the cost of care. Every $1,000 that you are able to remove from your spouse’s 2020 tax return by using the above strategies will lower care fees by $800.
Your spouse’s 2020 Notice of Assessment will be looked at next November and you will receive notification of the new LTC rate for January 2022. If you use the 3 strategies above and are successful at bringing down his/her income as compared to 2019, it is possible to request an early rate reduction.
Written by Peggy Hoult,
Seniors’ Care Navigator & Tax Accountant
specializing in Aging & Disabilities
250-756-0644 info@peggyhoult.com