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Home Sharing Payments, Family Members, and Tax Considerations
The Canada Revenue Agency (CRA) manages taxes, benefits, and other programs for the Government of Canada and most provinces and territories.
The CRA has rules about when payments for care provided in a private home may be tax-free.
One important rule is the relationship between the caregiver and the person receiving care. The person receiving care cannot be the caregiver’s spouse or common-law partner. They also cannot be related to the caregiver or to the caregiver’s spouse or common-law partner.
This means that if a family member is paid to provide home sharing support to another family member, the payments may need to be reported as taxable income.
The tax exemption usually applies when the home sharing provider is supporting someone who is not a family member.
For the tax exemption to apply, the CRA looks at requirements such as:
- The person receiving care is not the caregiver’s spouse or common-law partner.
- The person receiving care is not related to the caregiver or their spouse or common-law partner.
- The person receiving care lives in the caregiver’s main home, or the home is kept available for them during the period covered by the payment.
Because family members are considered related, family home sharing arrangements may not qualify for this tax exemption.
Family members who provide support may still qualify for other tax credits or programs that can help with some of the costs of caring for a family member.
CRA Definition of a Related Person
The term related person is important when looking at how home sharing payments are taxed.
Under CRA rules, related people are generally not considered to deal with each other at arm’s length for tax purposes.
People can be related through:
- Blood relationship
- Marriage
- Common-law partnership
- Adoption
Blood relationships can include:
- Parents and children
- Grandparents and grandchildren
- Other direct family descendants
- Brothers and sisters
For example, if one sibling is paid to provide home sharing support to another sibling, they are considered related for tax purposes.
Link: Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length – Canada.ca
Disability Tax Credit
A family member may need to report home sharing payments as income. However, the person receiving support or a supporting family member may qualify for the Disability Tax Credit (DTC).
The DTC is a non-refundable tax credit. It can lower the amount of income tax a person has to pay.
If the credit is worth more than the amount of tax owed, the extra amount is not paid as a refund.
A person may qualify for the DTC if a medical practitioner confirms that they:
- Have a severe and long-term impairment in one area
- Have serious limits in two or more areas
- Need therapy to support a vital body function
The CRA reviews the medical information and decides if the person qualifies.
Link: Disability Tax Credit – Canada.ca
Canada Caregiver Credit
The Canada Caregiver Credit is another non-refundable tax credit.
It may be available to someone who supports a spouse, common-law partner, or dependent who has a physical or mental impairment.
The amount a person can claim depends on things such as:
- Their relationship to the person receiving support
- The income of the person receiving support
- Other tax credits being claimed
Link: Canada Caregiver Credit – Canada.ca
Community Living BC Policy
Community Living BC (CLBC) also has rules about family members providing paid services.
Community living agencies may have their own requirements as well.
The CLBC Service Provision by Family Members Policy says that family service arrangements should be reviewed before they are approved.
The review may look at:
- Whether the arrangement is practical and appropriate
- The need for wellness support
- The effect on other family members
- Possible conflicts of interest
- Health and safety risks
- Tax issues for the family member providing support
Tax issues should be reviewed before a family member starts receiving payments for providing support.
Link: Service Provision by Family Members Policy
Getting Tax Advice
The tax treatment of home sharing payments can be different depending on the situation.
It may depend on:
- The relationship between the people involved
- How the home sharing arrangement is set up
- How the funding is paid
- The household’s individual circumstances
Home sharing providers and families should contact the CRA or speak with a qualified tax professional about their own situation.
HSSSBC cannot decide whether a specific payment is taxable and cannot provide individual tax advice.
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