Morgan joined the team in February, 2019 with 8 years of financial planning and financial literacy training under her belt. She is as comfortable working on complex financial planning engagements as she is helping young adults understand budgeting and debt management.
In the past year I have fortunately been diagnosed with celiac disease and moderate hearing loss. I say “fortunately” because these afflictions are relatively easy to treat with a strict diet and hearing aids, respectively. Also fortunate is that this tax season, I will become personally acquainted with the medical tax credit. As a planner, it is gratifying to have first-hand experience on the same issues our clients may experience.
What is the medical expense tax credit (METC)?
The medical expense tax credit is a non-refundable credit*. Non-refundable means that you can receive a credit only to the point where your taxes are reduced to zero. It’s like having a coupon for Tide. If you buy the Tide, you get money back equal to the value of the coupon. If you do not buy the Tide, the coupon is worthless. Similarly, non-refundable tax credits are of no value to a taxpayer once there are no taxes owing.
Non-refundable tax credits reduce your federal tax owing by 15% of the claimed amount. Provincial tax credits usually also apply. The amount varies across the provinces.
Who can you claim the METC for?
You will use line 330 or 331 of your tax return to claim eligible medical expenses.
Line 330 - Combined medical expenses for self, spouse/common-law partner and dependant children under 18
Line 331 - Medical expenses for ‘other dependants’ who depended on your or your spouse/common-law partner for support. Other dependants include:
- children 18 or over, grandchildren, parents, grandparents, siblings, aunts, uncles, nieces or nephews*
What can be claimed?
All eligible medical expenses can be claimed, even if they are incurred outside of Canada. However, you can only claim the part of the expense that you or someone else have not been and will not be reimbursed for.
Some common examples are:
- Prescription drugs
Some eligible costs may pleasantly surprise you, such as in reproductive technology programs, laser eye surgery and private health services plans.
CRA provides a common list of searchable eligible medical expenses here, and a more exhaustive list here.
Health care services such as massage, acupuncture or chiropractor may or may not qualify for the METC depending on your province. Find out which health care services are covered in your province, here. For those of you in Quebec, you may be interested to know that yours is the only province in which a marriage therapist and sexologist both qualify for the METC!
Note for you Celiacs out there - Gluten-free food is eligible as long as you have a Celiac diagnosis and a doctor’s note. It’s a bit of work however. First, only the incremental cost of the GF food is claimable. For example, if regular bread costs $3, and GF bread costs $7, you can claim the $4 difference. Secondly, you have to track these incremental costs and keep your receipts in case you are ever audited. For tracking, a simple spreadsheet like this one will do.
For what time period can you claim?
You can claim medical expenses for any time frame within any 12-month period ending in the current tax year, and which have not been claimed in the prior tax year. For example, if you are claiming medical expenses on your 2018 taxes, your time period of expenses could be:
- March 2017 - February 2018
- September 2017 - August 2018
- January 2018 - December 2018
The point is that the ending month must be within 2018, and the period cannot include any previously claimed expenses.
How do you calculate it?
Step 1 - Add up the total amount paid in eligible medical expenses
Step 2 - Calculate the lesser of the following amounts:
- 3% of your net income (line 236)
Step 3 - Subtract step 2 from the amount on step 1. This is your claim amount.
|3% of Net Income
|Eligible medical expenses
|Lesser of 3% Net Income and $2,302
||$5,000 - $2,302 = $2,698
||$5,000 - $1,500 = $3,500
|Federal tax reduced by
||15% X $2,698 = $405
||15% X $3,500 = $525
Whose expenses can I combine?
While line 300 allows you to combine expenses for yourself, your spouse/common-law partner and your children under age 18, the same cannot be said for ‘other dependants’ on line 331. For these dependants, you must make the calculation separately for each person; expenses cannot be combined in any way**.
Can either partner claim the METC?
Yes! It is usually better for the partner with the lower net income to claim the eligible medical expense.
In summary, calculating your medical expense tax credit can take some time, research and organization. Your accountant or financial planner can provide you with guidance. Come tax time, you’ll be glad of your efforts.
*A refundable medical expense supplement is available to working individuals with low incomes and high medical expenses.
**Ontario and Northwest Territories have maximum claimable amounts with regards to line 331 dependants.
This information is of a general nature and should not be considered professional advice. Its accuracy or completeness is not guaranteed and Queensbury Strategies Inc.assumes no responsibility or liability.