The medical expense tax credit allows tax filers to claim expenses from any 12-month period ending within the given taxation year.VectorCookies/iStockPhoto / Getty Images
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Many Canadians enjoy the perks of employee benefit plans that cover a variety of therapies, medications and procedures.
But for those without a robust benefits plan through an employer, those with serious health issues, and for seniors requiring care, medical expenses can add up quickly. Advisors who know which expenses qualify for the medical expense tax credit can guide their clients on what to submit.
The medical expense tax credit allows tax filers to claim medical expenses for which they weren’t reimbursed from any 12-month period ending within the taxation year. The expenses must meet a threshold of $2,635 or 3 per cent of a client’s net income, whichever is lower, that’s deducted from the expenses paid.
Medical expenses can be claimed on either spouse’s tax return or split between them. “If both spouses have taxable income, it’s usually better to claim the medical expenses on the return with the lower net income,” says Mayur Gadhia, founder of accounting firm CloudAct in Toronto. In addition, he says, clients can claim medical expenses for eligible dependents.
The Canada Revenue Agency (CRA) has a list of what constitutes a medical expense, although the list isn’t exhaustive. Plus, what’s covered can vary from province to province – and change year over year.
As a result, some items get missed, says Wesley Fong, senior planner with CWB Wealth in Vancouver.
“Medical expenses are often misunderstood – even for tax preparers it’s not the most straightforward process,” he says.
Many of the items that could be claimed amount to thousands of dollars and frequently affect Canadians with the lowest incomes, Mr. Fong says. Other times, clients claim items they shouldn’t.
Laura Whiteland, financial planner and owner of Inclusive Financial Planning in Truro, N.S., says one of the ineligible medical expenses she catches routinely is for massage therapy, which is not a medical expense in every province.
She also reminds clients to have doctors’ prescriptions for things such as air conditioners and air purifiers, as well as for paramedical services, provided they’re covered in that province.
Other commonly claimed ineligible items include blood pressure machines, gym memberships, osteopathy treatments, cosmetic procedures such as age-spot removal, and over-the-counter medications.
Here are some other common mistakes when it comes to medical expenses:
Attendant care expenses: These are expenses that a client incurs when staying at a nursing home or receiving home care. To claim these expenses, a client has to be eligible for the disability tax credit (DTC), a non-refundable tax credit that assists those with disabilities or their supporting family members. “Many seniors may be eligible for the DTC, but they don’t apply for it and can’t claim attendant care expenses,” Mr. Fong says, adding that 24/7 care can cost $10,000 a month.
Medical travel expenses: These are also frequently missed. Ms. Whiteland says if someone travels more than 40 kilometres from their home to seek medical care, they can claim the cost of transportation. For travel of more than 80 km for medical care, a client can claim vehicle expenses, accommodation, meals and parking costs. And if a doctor has signed off on a caregiver, the costs of the caregiver’s travel can also be claimed.
Orthodontic expenses: Getting braces can set clients back thousands of dollars. Yet, these expenses frequently aren’t claimed, Ms. Whiteland says.
Kinesiology treatments: Clients who have paid out of pocket for the services of a kinesiologist will be out of luck claiming them in any province other than Ontario, Mr. Fong says.
Elective plastic surgery: If a client has had a tummy tuck or facelift, it’s generally not deductible, says David Rotfleisch, a tax lawyer and managing partner of Rotfleisch & Samulovitch Professional Corp. in Toronto. However, an expense for a cosmetic procedure qualifies as an eligible medical expense if it’s necessary for medical or reconstructive purposes, such as surgery to correct a deformity present at birth, a personal injury resulting from an accident or trauma, or a disfiguring disease, according to the CRA.
In vitro fertility costs: Clients who have paid fees to a fertility clinic or donor bank in Canada to obtain sperm or eggs may be able to claim those expenses. The amounts must be paid to enable the conception of a child by the individual, the individual’s spouse or common-law partner, or a surrogate mother on behalf of the individuals, according to the CRA.
Preparing claims
Ms. Whiteland says clients should collect all their medical expenses and store them safely on their computers. She says many pharmacies can also print off a list of prescription costs for the year, breaking out the fees the client paid. Dentists can provide an itemized list of dental fees paid in a given year. And employers can offer printouts of all the benefit premiums the employee has paid.
Ms. Whiteland says clients work with their advisors to determine the most advantageous 12-month period in which to claim their medical expenses.
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Editor’s note: A previous version of this article misattributed quotes from Wesley Fong of CWB Wealth to Wes Ashton of Harbourfront Wealth Management. We apologize for the error.