Medical expense tax credit
For example, the medical expense tax credit (METC) is a non-refundable tax credit that helps Canadians reduce the financial burden of medical expenses. It can be claimed for a wide range of medical expenses that are not covered by insurance or other government programs.
The amount an individual can claim for this credit is determined by their net income (from all sources, business or otherwise). If medical expenses total more than 3% of their net income, they can claim the amount of the expenses over that amount.
For example, if a taxpayer has a net income of $50,000 and incurs $3,000 in eligible medical expenses, they would be able to claim the amount that exceeds 3% of their net income (which is $1,500). So, they can claim $1,500 ($3,000 - $1,500) for the METC.
The credit the taxpayer will receive against their taxes owing is calculated as the $1,500 they can claim multiplied by the lowest tax bracket. In this case it is 15% federally, so the credit equals $1,500 x 15% = $225. If the taxpayer owed $1,000 in taxes, they would subtract their medical credit amount of $225 to get a new amount owed of $775 ($1,000 - $225).
Unlike the tax savings on deductions, which are calculated based on the taxpayer's tax bracket, most tax credits are calculated using the lowest tax bracket. There are exceptions, and it's always advisable to consult with a tax professional or refer to the CRA's guidelines to understand which deductions and credits are applicable in individual cases.