As an aging nation, it beneficial to be familiar with the medical expense tax credit. Many people do not even bother to add up and claim their medical expenses because they do not believe the effort will pay off. This may not be surprising considering it’s probably one of the more difficult tax credits to calculate since the rules are complicated in terms of what is eligible and what is not (Carrick, 2015). For these reasons, many people miss out on the medical expenses tax break. They also may not be aware of the vast array of medical expenses that they might qualify for.
Indeed, the list of eligible medical expenses is extensive and many people overlook the following common expenses that can be incurred as a result of illness, disability, or injury: batteries for hearing aids, glasses, travel expenses, scooters, walking aids, treatments from naturopaths, and much, much more (“Tax time”, 2011).
The Canada Revenue Agency (CRA) also takes into account the less-obvious secondary expenses that are intended to improve quality of life. These types of expenses can include tutoring for a person with a learning disability, moving expenses for a person who needs a house that is better equipped for their disability, air conditioning, orthopedic shoes and inserts, and even page turner devices that help turn the pages of a book (“Allowable medical expenses on tax returns”, 2015).
People with a gluten allergy can claim the higher cost of gluten-free products if prescribed by a doctor, and the difference between the cost of the gluten-free product and a similar non-gluten-free product is the allowable medical expense (“Tax time”, 2011).
Alterations to the home, driveway, or vehicle to help someone maintain their mobility are another claimable but often-missed expense. The CRA indicates that the expenses have to be for renovations that would not typically be expected to increase the value of a home and that would not normally be incurred by people who don’t have severe mobility issues (“Tax planning guide”, 2016).
The definitive list of what medical expenses are eligible for a tax credit can be found on the CRA website: http://www.cra-arc.gc.ca/medical/
Be sure to check the list annually because items are occasionally added and removed.
Important Things To Consider
When claiming medical expenses, you cannot simply receive credit just by stating that you need certain items, medications, aids, or services. Most of these items require a prescription or other medical documentation (“Allowable medical expenses on tax returns”, 2015). It is also important to hold onto any receipts or proof of payment you collect throughout the year. Developing a habit of collecting medical receipts in one particular envelope or box can reduce the chance of them getting lost and prevent last-minute scrambling when tax creeps up. Wherever possible, it is also wise to back up a claim for the medical expense tax credit by having a doctor’s note or prescription that you can send to the CRA if requested (Carrick, 2015).
When it comes to medical expenses, those with low income may qualify for an additional refundable tax credit called the “refundable medical expense supplement (“Allowable medical expenses”, 2015).
The Disability Tax Credit
The disability tax credit is the most lucrative non-refundable tax credit offered in Canada — worth more than $1,500 a year in real money, depending on the province. This is another often-overlooked break. The credit is intended for those with severe and prolonged physical or mental impairments. To be eligible, the disability must significantly restrict activities of daily living. A physician or licensed practitioner must complete and certify the medical section on form T2201 (“Tax time”, 2011).
People who do not qualify for the tax credit in one year may qualify in subsequent years with progressive illnesses like cancer or Alzheimer’s disease, so it’s worth it to re-apply. People can also go back and adjust previously-filed tax if they feel they could have qualified years ago but never filed. A doctor needs to certify that the disability was present earlier and the applicant can then file a T-1 adjustment request for each year they are seeking to make amendments to (“Tax time”, 2011).
Claiming a Dependent’s Medical Expenses
In addition to claiming medical expenses for your immediate family, you can also claim these expenses for a mother-in-law, uncle, niece or another extended family member, provided that individual depended on you for support and was a resident in Canada for some time during the year (“Allowable medical expenses on tax returns”, 2015). Medical expenses paid for other dependant relatives must first be reduced by 3% of that dependant’s net income, to a maximum of $2,208 in 2015 (Carrick, 2015).
The CRA requires that the eligible amount of medical expenses be calculated for each eligible dependent separately.
You will then be required to subtract either $2,152 (as of 2013) or 3 percent of the dependent’s net income from the amount of the medical expenses, whichever is less.
As an example, if your dependent has $5,000 worth of medical expenses and a $20,000 net income, your credit for that dependent would be $4,400 (3% of $20,000 would be $600. This figure is subtracted from $5000).
$20,000 net income X 3 percent = $600
$600 is less than $2152 so the $600 is deducted from the expense amount (“Allowable medical expenses on tax returns”, 2015).
Attendant Care in a Retirement Home
In general, payments made to a nursing home or long-term care facility qualify for the medical expense tax credit, provided the individual meets all the criteria to claim the disability tax credit. The issue has been less clear with respect to amounts paid to a retirement home. However, it is the CRA’s position that seniors who live in a retirement home and are eligible for the disability tax credit can claim attendant care expenses as medical expenses. The maximum amount that can be claimed under this provision is $10,000 per year ($20,000 in the year of death).
To make the claim, you must obtain a receipt from the retirement home showing the portion paid for attendant care and also be eligible for the disability tax credit (“Tax planning guide”, 2016).
If you have a private insurance program, you are generally able to add your portion of the medical costs into your medical expenses. For example, on a $100 expense where the insurance pays $80 and the patient pays $20, the $20 portion is deductible (“Allowable medical expenses on tax returns”, 2015).
Claiming Travel Expenses if You Live in a Remote Area
People living in remote areas should be aware that they can claim travel expenses related to medical treatment. According to CRA rules, you can claim travel expenses if you must commute at least 40 kilometers one way to obtain medical services. In addition, if medical services are at least 80 kilometers away from home, you may be able to claim accommodations, meals and parking costs as well. You can also claim medical expenses incurred out of the country that aren’t covered by travel medical insurance (Carrick, 2015).
Expenses You Cannot Claim
According to the CRA, taxpayers often mistakenly claim several different medical expenses . These are expenses people think are eligible expenses when in fact, they are not (“Allowable medical expenses on tax returns”, 2015). For example, you cannot include non-prescription birth control, over-the-counter medications, athletic club fees, organic foods, funeral and burial costs, and cosmetic surgeries that have no medical basis. In addition, you cannot claim medical expenses for which you are reimbursed or are entitled to be reimbursed, such as previously reimbursed travel expenses. Amounts paid for purely cosmetic procedures are not eligible for the medical expense tax credit unless they’re required for medical or reconstructive purposes, as may be the case for seniors and others requiring dental work involving dentures or implants (“Tax planning guide”, 2016).
Allowable medical expenses on tax returns (2015). Intuit Canada ULC. Retrieved from https://turbotax.intuit.ca
Carrick, R. (2015, April 6). Medical expenses: why it’s worth boning up on this tax credit. The Globe and Mail. Retrieved from www.theglobeandmail.com
Tax time: medical expenses to consider (2011, February 28). CBC News. Retrieved from www.cbc.ca
Tax planning guide 2015 – 2016 (2016). Grant Thornton LLP. Retrieved from http://www.taxplanningguide.ca/tax-planning-guide