Did you know that you can claim medical expenses on your income tax?
In Canada, you can take advantage of the Medical Expense Tax Credit (METC). This is a non-refundable tax credit that allows you to claim eligible medical expenses for yourself, your spouse or your dependents.
The process isn’t as straightforward as simply plugging in your numbers, however. First, you need to determine if your expenses are eligible and if you meet the cost threshold to claim them.
It can be confusing but, here at Liu & Associates, we want to help you understand the process. Keep reading to learn more about claiming medical expenses:
How Does the Medical Expenses Tax Credit Work?
The Medical Expenses Tax Credit is available as a non-refundable credit – meaning that you can’t get money back from it but it will apply to and lower any taxes owing.
You can claim your medical expenses as a tax credit during the year that you paid for them for yourself, your spouse or a dependent. These expenses include prescription medication, prescribed medical tests, etc.
You can view an entire list of eligible medical expenses on the Government of Canada’s website.
However, there is a threshold when it comes to claiming these expenses. The medical expenses must amount to 3% or more of your net income during the taxation period or higher. You can only claim amounts that exceed this percentage.
Alternatively, there is a predetermined base amount for each tax year so the amount you are looking for is the lesser of the two.
For example, this amount for the 2020 tax year was $2397. So if your net income was $40,000, you can deduct any expenses in excess of $1200. However, if your income was over $79,900, you only claim expenses over that $2397.
Keep in mind as well that medical expenses do not have to follow a calendar year, only a 12 month period. This means that as long as the end of the 12 months falls within the tax year you are filing for, you can choose which 12 month period to claim.
For instance, if you had more medical bills between August and February, you can make your 12 month period from August 1st to February 28th and claim all of the expenses in the year February falls into.
Claiming medical expenses in a way that benefits you financially can be tricky. It’s recommended that you speak with a professional accountant in order to maximize your return.
Commonly Overlooked Medical Expenses You Can Claim on Your Tax Return
Apart from prescriptions and medication, there are many health-related costs you can claim under the Medical Expenses Tax Credit.
While Canada.ca does list every eligible expense, here are some common ones you may be overlooking:
Health Plans
The premiums you pay for medical and dental plans, along with any co-pay portions of your coverage, can be claimed on your taxes.
Any premiums paid by payroll deductions will appear on your T4 under “other information” (box 85).
If you pay for private health care coverage, make sure you claim these amounts as well. Your provider should send you a letter stating how much you paid into the plan the previous year.
Gluten-Free Products
If you, your spouse or your dependent suffer from Celiac disease, you can claim the costs of gluten-free products – but only for that individual, not the entire family.
To calculate the eligible expense, take the product cost and minus the cost of a comparable product with gluten. This is the amount you can claim.
Travel Expenses
If you are required to travel more than 40km one way to receive medical services, you can claim your travel expenses.
However, in order to qualify, you must prove that equivalent services are not available closer to your home.
Moving Expenses or Renovations
If you suffer from a severe and prolonged impairment mobility-wise, you can claim up to $2000 to move to a more accessible home.
Likewise, you can also claim construction and renovation costs to changes made to your current resident to better accommodate a mobility or functioning issue. However, the cost must be reasonable.
Private School/Tutoring
If you have a child with a physical or mental impairment that requires special schooling (such as staff, facilities or equipment), you may be eligible to claim tuition costs.
Also, you can claim tutoring services for those with learning disabilities or impaired mental function.
In either case, you need to have a medical practitioner certify the need.
Foreign Medical Expenses
If you require medical services while traveling outside of Canada, either in a public or private hospital, you may be able to claim these expenses.
How to Claim Medical Expenses on Your Tax Return
The first thing you need to do when claiming medical expenses on your tax return is to determine if you have an eligible amount. Again, you can always speak to an expert accountant to help you figure this out.
Once that has been determined, it’s important to gather and keep track of all of your receipts. Although you are required to submit them, you need to make sure your totals are accurate.
Plus, should you experience an audit by the CRA, you need to provide proof of your claims.
On your tax return, look for the following lines to enter your amounts:
- Line 33099 – Medical expenses for self, spouse or common-law partner, and your dependent children
- Line 33199 – Allowable amount of medical expenses for other dependents
That’s it! Figuring out what to claim is the hard part – actually claiming it is straightforward.
If you have any questions about which medical expenses are eligible and how you should claim them on your taxes, do not hesitate to contact our knowledgeable team of accountants at Liu & Associates.
We can help guide you through the process and ensure that you get the most out of your tax return!