Canada has an excellent healthcare system, even though some medical treatments aren’t free. But here’s good news. When you incur sizable medical expenses from year to year, there’s tax relief available from the Canada Revenue Agency (CRA). It’s called the federal medical expense tax credit, and some provinces have similar tax credits. If you want to make notes now for tax time, these CRA-approved medical expenses you can claim might surprise you.
The Medical Expense Tax Credit
You find the federal credit on lines 330 and 331 of your federal tax return. It’s a flexible option that lets you claim an amount for eligible medical expenses you incurred during any 12-month period ending in the previous year. So you don’t have to make a claim for expenses only from Jan. 1 to Dec. 31. Just choose whatever 12-month period gives you the most credit.
- Line 330 tax return covers fees paid for yourself, your spouse or common-law partner, and your dependant children born in 2000 or later, even if they weren’t paid in Canada.
- Line 331 tax return covers allowable amounts of medical expenses you and your spouse or common law partner paid for other dependants.
- This part of the medical expenses credit includes payments for children born in 1999 or earlier, or grandchildren, as well as parents, grandparents, uncles, aunts, and other relatives who were Canadian residents at any time during the year.
- Your credit is limited to expenses above 3% of you or your spouse’s income, or a specific dollar amount the CRA sets each year, whichever is lower. For 2018, the dollar amount is $2,268.
- For example, imagine you spent $5,000 on eligible expenses and your net income was $35,000. Since 3% of your net income is $1,050 and this amount is less than $2,268, you deduct it from your eligible expenses to arrive at $3,950. This is the amount you can claim.
- As another example, imagine you spent $3,000 on eligible expenses and your net income was $85,000. Since 3% of your net income is $2,550 and this amount is greater than $2,268, you deduct $2,268 from your eligible expenses to arrive at $732. This is the amount you can claim.
As a tax strategy, you might want to have the lower-earning spouse or common law partner claim the entire family’s expenses and take advantage of the 3% threshold.
So what’s eligible? The Income Tax Act and its regulations define eligible medical expenses. On its website, the CRA publishes a list of what it considers eligible, but the list doesn’t include every eligible expense, since medical technology keeps changing.
These eligible expenses stand out:
- Medical insurance, whether it’s private or from the government
- Insurance covering medication, even if it’s mandatory in some provinces
- This cost alone often exceeds the medical expense credit minimal threshold
- Generally, fees paid to medical practitioners, such as doctors, dentists, nurses, and physicians
- Fees paid to public or private hospitals
- Fees paid for attendant care at home or in facilities including nursing homes, group homes, and schools.
The CRA defines eligible fees broadly and includes costs related to a medical condition. Reasonable transportation and travel fees when you go for medical treatment are eligible for the credit. Fees incurred outside of Canada, such as while vacationing, are eligible, too.
Can you claim medical marihuana on taxes? Yes. The CRA says if a patient is authorized to possess marihuana for medical purposes under the Marihuana Medical Access Regulations, then medical marihuana costs may qualify as medical expenses for the tax credit.
Ineligible Medical Expenses
Even though the medical expenses tax credit is generous, some expenses aren’t eligible. Keep an eye out for these expenses, because you don’t get a tax credit for them:
- Fees paid for elective medical procedures
- Fees related to purely cosmetic surgeries not considered medically necessary
- Hair replacement procedures
- Filler injections for removing wrinkles
- Teeth whitening
- Athletic or fitness club fees
Remember to keep your receipts for expenses you claim in case the CRA has any questions.
Unexpected or high medical expenses for your family and yourself can take a chunk out of your budget, but the Medical Expense Tax Credit helps offset those costs. QuickBooks Online can help you maximize your deductions. Keep more of what you earn today.