ARE YOU LEAVING MONEY ON THE TABLE?
By Mayur Gadhia, CPA, CA
To avoid tedious paperwork, most people don’t keep records of medical expenses. In other cases, individuals simply forget to keep track of their medical expenses, not knowing the potential tax benefit.
As a rule of thumb, under the Canadian Income Tax Act, certain medical expenses incurred for yourself, your spouse or common-law partner, and your children under 18 years or specific dependants are eligible for medical expense tax credit, provided they are listed as an “eligible” medical expense. It’s important to note that you can only claim the part of the eligible medical expense that you or someone else has not and will not be reimbursed for, subject to certain conditions. This article provides some basic points to consider.
What to claim?
The medical expense tax credit is a non-refundable tax credit that is applied to reduce the Part I tax liability of an individual. Using the 2017 tax year as an example, on line 330 of your return, you can claim eligible medical expenses if you or your spouse or common-law partner: 1) paid or deemed to be paid medical expenses in any 12-month period ending in 2017; and 2) did not claim them in 2016.
You can select a 12-month period to maximize your tax credit. However, you cannot claim on two separate returns. You must claim the federal and provincial medical expenses for the same time period.
In addition, on line 331 of your return, you can claim the part of eligible medical expenses you or your spouse or common-law partner has paid for people who depend on you for support—in other words, your dependents. Your dependents can be children, grandchildren, parents, grandparents, brothers, sisters, uncles, aunts, nieces, nephews or your spouse or common-law partner. Generally, expenses for minors (i.e., children) should be claimed on line 330.
Subject to certain conditions, the CRA allows you to claim most eligible medical expenses incurred outside of Canada. However, if the expense is reimbursed by any medical or insurance plan, only the amount not reimbursed should be claimed. Some important exceptions for eligible medical expenses paid or deemed to be paid relate to attendant care, which must be provided in Canada, and in respect of care in a group home that must be located in Canada.
How much can you claim?
Eligible medical expenses for you, your spouse or common-law partner and dependent children under 18 years can be claimed on line 330. For 2017, your total eligible medical expenses must first be reduced by three per cent of your net income or $2,268, whichever is less. The remaining amount is used to determine the tax credit.
For a person who is dependent on you, in 2017, your expenses must again first be reduced by three per cent of that dependant’s net income, to a maximum of $2,268, calculated separately foreach dependant. The remaining amount is used to determine the tax credit.
What expenses are eligible?
The CRA deals with a wide range of medical tax credit claims. As a result, it has published detailed guidance on its position on treatments, procedures and devices that can be claimed as eligible medical expenses. The list of eligible medical expenses is extensive, and below I outline selected common eligible medical claims, and some that are specifically excluded and cannot be claimed. The full list is available on the CRA’s website at canada.ca/en/revenue-agency.
4 Payments made to corporations, partnerships, societies and associations for medical services rendered by their employees or partners are eligible medical expenses only where the person who provided the service is a medical practitioner, dentist or nurse authorized to practice (subject to certain conditions), and the service provided was a medical or dental service. For example, fees paid to a weight-loss clinic for therapeutic or rehabilitative treatments for the purpose of treating obesity, or fees paid to a registered charity for physiotherapy treatments, are eligible if the treatments were administered by a medical practitioner acting within the scope of their professional training. The fact that the receipt may be issued by the corporation, partnership, society or association, rather than the medical professional. The list of medical practitioners varies across Canada.
- An air conditioner purchase of $1,000 or 50 per cent of the amount paid, whichever is less. Normally, a person with a severe chronic ailment, disease or disorder can make the claim. A prescription is required.
- Dentures and dental implant can be claimed without any certification or prescription.
- The amount paid for an electric or sealed combustion furnace bought to replace a furnace that is neither of these because of a person’s severe chronic respiratory ailment or immune system disorder. Again, you’ll need a prescription to make this claim.
- Tutoring services that are additional to the primary education of a person with a learning disability or impaired mental function, and paid to an unrelated person in the business of providing these services can be claimed with certification in writing that these services are needed.
- Medical marihuana costs are eligible subject to compliance with appropriate government regulations. The amounts paid for marihuana, marihuana plants or seeds, cannabis or cannabis oil for a person authorized to possess these substances, for their own medical use, are regulated under the Access to Cannabis for Medical Purposes Regulations or section 56 of the Controlled Drugs and Substances Act. These substances must also be purchased in accordance with these directives.
- Finally, individuals who have required medical intervention to conceive a child are eligible to claim the same expenses as individuals with medical infertility. You can also request an adjustment to claim such medical expenses on any income tax return for the previous 10 calendar years.
What expenses are not eligible?
8 Amounts paid for gym, athletic or fitness club fees, blood pressure monitors, cosmetic surgery, diaper services, over-the-counter medications, vitamins and supplements or organic food, and premiums paid for provincial and territorial health plans are not eligible.
Track and tally
You should keep good records of paid and deemed paid eligible medical amounts. Acceptable forms of documentation may include receipts, prescriptions, certifications in writing (for claims for which this is required) and form T2201 (disability tax credit certificate). You don’t need to send these documents with your tax return, but you must be ready to support your claims if requested. Last, don’t forget to claim amounts of medical expenses paid or deemed paid for dependents.
This article offers a generic overview. Readers should talk to a qualified professional to discuss tax implications based on their circumstances.
Mayur Gadhia, CPA, CA, is the Founder of CloudAct CPA Professional Corporation, which provides accounting, taxation and business advisory services to small businesses and self-employed professionals.