TAXES
Kathryn Edwards
Medical Expenses:
Tax Credit
Offers Some Relief
M
ost of us incur medical
expenses of one type
or another at some
point in our lives.
They may be just for the
occasional prescription or they may
be for very significant costs incurred
relating to a severe or prolonged
condition. In any case, if you meet the
criteria of Canada Revenue Agency
(CRA), a tax credit may be available
to reduce your income tax.
Who Can Make a Claim?
You may be able to claim the medical
expense tax credit if you have
sufficient eligible medical expenses to
report.
You may claim—on line 330
of schedule 1 of your personal tax
return—the eligible medical expenses
that were paid for any of the following
individuals.
• Yourself
•Your spouse or common law
partner
•A child (of you, your spouse, or
your common law partner) who
had not attained the age of 18 by
December 31 of the calendar year
Only expenses in excess of the
lesser of a threshold amount can be
claimed: $1844 (federal amount for
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2005, subject to annual indexing)
plus 3 percent of net income. Only the
lowest tax rate is applied to determine
the amount of the credit, so it doesn’t
matter if you are in the highest or
lowest tax bracket; the credit (and the
tax benefit) will be the same.
…if you meet the criteria
of Canada Revenue Agency
(CRA), a tax credit may be
available to reduce your
income tax.
Additional Claim for Other Dependants
You can claim—at line 331 of
schedule 1—the portion of medical
expenses that you, your spouse, or
common law partner paid for the
following persons who depended upon
you for support.
•A child or a grandchild (of you,
your spouse, or your common law
partner) who was 18 years of age
or older as at December 31
•A parent, grandparent, brother,
sister, aunt, uncle, niece, or
nephew (of you, your spouse, or
your common law partner) who
was a resident of Canada at any
time in the year
Note that the residency
requirement does not apply if the
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person is the child or grandchild of
the taxpayer or the taxpayer’s spouse
or common law partner.
You must calculate separately the
total medical expenses claimed for
each dependant included on line 331.
The amount you may claim:
•is limited to the lesser of the
threshold amount ($1844, federal
amount for 2005) plus 3 percent
of that dependant’s net income;
and
•is subject to a maximum of
$10,000 for each dependant (up
from a $5000 limit in 2004).
Tax Tip
To maximize the credit, consider
grouping all the eligible medical
expenses on the tax return of the
lower-income spouse. In this way, the
nondeductible portion will apply only
once and the amount of expenses
available for the credit will be greater!
What Medical Expenses Can Be
Claimed?
You can claim qualifying medical
expenses that were paid within
any 12 month period ending in
the calendar year. If, however, the
individual died in the year, you can
select any 24 month period that
includes the date of death.
Volume 15 Number 3 Fall 2006
Tax Tip
If you don’t have enough eligible
medical expenses to make a claim
in 1 year, keep those receipts for the
following year. Because you can use
any 12 month period for your claim,
you may incur sufficient expenses in
the following calendar year to make a
claim possible!
•You cannot claim expenses that
were reimbursed or that are
reimbursable.
•You cannot claim an expense if
it was already included in a prior
year’s claim.
•If you failed to make a claim in
the last few years but believe you
were eligible, you may still make
a claim by filing with CRA the
form T1-Adjustment Request and
attaching your medical receipts.
•Generally, CRA will allow you to
amend a prior year’s tax return as
long as that year is not “statutebarred.”
A vast variety of expenses,
from prescription drugs to cosmetic
surgery, may qualify as eligible for
calculation of the tax credit. To ensure
you are not missing any opportunities,
you should refer to CRA’s Website at
www.cra-arc.gc.ca/E/pub/tp/it519r2consolid for a fairly comprehensive list
of eligible items.
CRA may require receipts to
support your claim.
•If you are paper-filing, attach your
receipts to your return.
•If you are e-filing, keep your
receipts on hand, because they
may be later requested by CRA.
Failure to provide receipts when
required can result in your claim
being disallowed!
Tax Tip
•If an individual is certified as
eligible for the Disability Tax
Credit (DTC), the cost of a fulltime attendant or full-time care in
a nursing home can be claimed as
an eligible medical expense.
•If these expenses are claimed for
purposes of the medical expense
Volume 15 Number 3 Fall 2006
tax credit, however, the DTC
may not also be claimed! For
this reason, some consideration
should be made to determine the
best approach. It can be tricky!
Alternative Medicines
Many approaches to heath care are
available today. For tax purposes,
however, when making a claim for
the medical expense tax credit, you
should ensure that the item you wish
to claim is eligible for these purposes.
For example, nonprescription
medications (medications not required
to be “recorded by a pharmacist”)
are currently not considered eligible
by CRA, even though they may be
prescribed by a doctor.
A vast variety of expenses,
from prescription drugs
to cosmetic surgery, may
qualify as eligible for
calculation of the tax credit.
There’s More?
Yes! You may also be able to claim
an additional refundable medicalexpense supplement. To determine
your eligibility and calculate your
claim, simply complete the chart for
line 452 on the Federal Worksheet in
the personal tax forms book. You can
claim the supplement for the same
medical expenses that you included
on lines 330 and 331 of schedule 1
of your tax return.
Caution
This article is not intended to provide
an exhaustive explanation of claims
and criteria for the medical expense
tax credit. Each taxpayer’s situation
must be analyzed on its own merits,
given current rules in place and
CRA’s changing policies. Professional
advice with regard to your own
specific circumstances is always
recommended.
Kathryn Edwards, CA, is a partner with
Pagnanini Edwards Lam, Chartered
Accountants.
Kathy@accountantsplus.ca
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