Medical Expense – Are they deductible for my tax return?
Author: Jessica Chen CPA
Do you know that you can reduce your federal and provincial taxes by claiming non-refundable tax credit on a wide variety of medical expenses that you, your spouse / common-law partner paid? You can claim the medical expenses for the amount you paid for yourself, your spouse / common-law partner, dependents (child under 18 years old) and qualifying dependents (child/grandchild over 18, parent, grandparent, brother, sister, aunt, uncle, niece and nephew) where you pay the medical expenses on their behalf. To qualify for the qualifying dependents, the individual must be dependent on your financial support and is a resident of Canada (except child and grandchild) when the expenses were incurred.
There are a few things you need to know:
1) 12 Month-Period
You can claim the eligible medical expenses for any 12-month period as long as the period end falls within the current calendar year (i.e. when you file your 2021 personal tax return, you can pick a day between January 1, 2021 to December 31, 2021 and you can claim any eligible medical expenses that fall within the 12 months before that date.
The deceased person can claim 24 months in the year of death.
2) Amount Paid within and outside of Canada
Eligible medical expenses include the expenses incurred inside and outside of Canada as long as it hasn’t been reimbursed by an insurance plan. You can only claim the medical expense that you have not to claim in the prior taxation year.
3) Minimum Threshold – claim on the tax return of lower net income spouse
You can choose to claim medical expenses individually or combine all the expenses to claim under one spouse’s tax return. Usually, it would be more beneficial to claim everything under the lower-income spouse if both spouses have tax payable. Here is why:
In 2021, you can only claim the medical expense tax credit for the portion that exceeds the lesser of 3% of net income or $2,421 federally and $2,462 in Ontario. For example, if your taxable income is $90,000 and your spouse is $50,000, you can only claim the medical expense that you paid in excess of the $2,421 federally (lesser of 3% of $90,000 or $2,421), but your spouse can claim medical expenses that were in excess of $1,500 (lesser or 3% of $50,000 or $2,421).
4) Back-up documentation
When you claim eligible medical expenses, please always keep your receipts, prescriptions, certification in writing, mileage logs, disability tax credit certificate (T2201 form). The receipts should indicate the purpose of the payment, the date of the payment, the patient for whom the payment was made. You do not need to submit any documents with your tax return, but please keep your supporting documents for six years in case the CRA selects your return for a review.
Allowable Deductible and Non-Deductible Medical Expenses:
Prescribed medicines and medications, not including over-the-counter products
Health insurance premiums for medical care coverage
prosthetic limbs
Air conditioners (and air filters) or furnaces that improve life for a person with a chronic condition
Bathroom aids
Baby-breathing monitors
Pre- and post-natal treatments and in vitro fertility treatments
Insulin, needles and syringes and infusion pumps to treat diabetes
Medical aids, including wheelchairs, hearing aids and batteries, eyeglasses, sunglasses (prescription only), contact lenses, crutches, braces, and guide dogs
Costs of dentures, dental services, and orthodontia services
Medical marijuana
Service animals (i.e. food, shelter and veterinary services for service dogs)
Oxygen and oxygen equipment
Eye surgery, such as Lasik or a similar procedure, when it is not for cosmetic purposes only
Travel expenses to receive medical care outside your community (at least 40 km one way) (mileage, meals and lodging for the driver, caregiver and patient)
Nursing care and nursing home expenses
Orthopedic shoes, boots, & inserts
There are numerous ineligible deductions for the medical expense and some of the common ones include:
over-the-counter medications, even with a prescription
fitness clubs
cosmetic surgery
health plan premiums
If you are not too sure about the deductibility of the medical expenses, you can always review the CRA’s list or reach out to your accountant.
If you have a modest income and a simple tax situation, you can generally find free tax clinics to assist you with your tax return. The clinics mostly offer in March and April and you can select your preferred language (includes Mandarin and Cantonese). Please visit the website for more details: https://www.canada.ca/en/revenue-agency/services/tax/individuals/community-volunteer-income-tax-program/need-a-hand-complete-your-tax-return.html
