Are you taking advantage of the medical expense tax credit to lower your tax payable. In this article, you will learn everything about the medical expense tax credit.
CRA allows Canadians to claim many deductions and tax credits to lower taxable income and tax payable. The medical expense tax credit is one of the most overlooked non-refundable tax deductions.
If you paid for medical expenses for yourself, your spouse, or dependent child under the age of 18, you can deduct eligible medical expenses to reduce tax payable. This tax credit can be claimed if medical expenses were paid within 12 months period ending in the current year and were not claimed in prior years. This means that you can deduct expenses paid from July 2019 to June 2020 on your 2020 tax return and you can only claim these expenses once.
You are also allowed to claim this credit for your other dependents and your spouse’s or common-law partner’s dependents such as parents, grandparents, etc.
Generally, all eligible medical expenses can be claimed, even if they were not paid in Canada. Note that you are only allowed to claim medical expenses for the portion that is not reimbursed by your insurance plan.
The list of eligible expenses you can claim is very long and comprehensive so chances are your medical expenses may qualify when filing your taxes.
What Medical Expenses are Deductible?
The list of eligible medical expenses you can claim is very long and we encourage you to refer to Canada Revenue Agency (CRA) website for complete list of of allowable deductible expenses. Some of these eligible expenses are:
Dental services
Prescriptions medications
Vision expenses (eyeglasses/contact lens)
Air conditioner and Furnace
Cosmetic surgery (some conditions apply)
Health insurance premiums
Hearing aid
Vitamin B12
As noted the list is very comprehensive and chances are that your expenses may qualify as eligible medical expenses. So if you are claiming this tax credit, be ready to provide necessary supporting documents in case CRA asks to see them. This includes prescriptions, written certificates, receipts, mileage logs, and T2201 form for disability.
What Expenses are Non Deductible?
Similar to a eligible expenses list found on CRA website, there are many ineligible deductions that cannot be claimed as medical expense tax credit. The most common ones include:
Over-the-counter medications, even with a prescription
Vitamins other than B12
Teeth whitening
Gym or fitness club fees
Birth control devices
Blood pressure devices
Organic meals
We recommend that you include your medical expenses on your tax return even if it doesn't meet the eligibility criteria as there are some exceptions to the list. CRA will simply disallow such deductions if they do not meet the eligibility criteria and there is no penalty for including them.
Tax Tip: When you are claiming eligible medical expenses tax credit, you should compare the amount you are allowed to claim with your spouse. In some cases, it may be more beneficial for the other spouse to claim the credit to maximize tax savings.
Missed Deductions
Each year, many number of eligible medical expense tax credits are overlooked such as travel related expenses. If you require medical service that is not available near your principal resident, you are allowed to claim travel expenses as eligible medical expenses.
Let's walk though an example:
If you have to travel to get to medical services, you are eligible to claim the travel expenses as medical expenses including, taxi, bus or train. If public transportation is not available to get to the medical facility, you may be allowed to claim personal vehicle expenses.
To be able to claim these expenses, there are certain condition that must be met:
the medical facility must be at least 40 kilometer (one way) and less than 80 kilometers (both way) from your home
the medical facility was not available near the principal residence of the individual
reasonable direct root was taken to reach the facility
In addition to transportation expenses, CRA may also allow you to deduct expenses paid for hotel, food and parking if you have to travel minimum of 80 kilometers (one way) from your home to get medical facility.
Refundable Medical Expense Supplement
Medical expense tax credit is a non-refundable tax credit, this means that if you do not have any tax payable, this credit may not provide any benefit. However, if you have modest working income, it is still recommended that you claim your medical expenses when filing your tax return, as you may qualify for the refundable medical expense supplement.
Our goal is to help Canadian individuals save and keep more of their hard earned money at tax time via ensuring that they are taking advantage of allowable tax deductions and credits available by CRA. Get in touch if you require tax preparation and planning services and we will be happy to help!