Medical Expense Tax Credit
Most medical expenses that you incur in the year can be claimed on your tax return as a tax credit. Tax credits are different than tax deductions in the sense that it lowers your Part I tax liability on an individual. With the Medical Expense Tax Credit, an individual may decrease their tax liability by 3% of their earned income to a maximum of $2,268.00, whichever is less, for the given tax year (2016). This amount is calculated at the lowest tax rate (15%). For example, if you have a total of $5000.00 in medical expenses for the year, your total tax credit would be $750.00 (this doesn’t mean you would get a tax refund of $750.00 if you didn’t have to pay any tax for the year, this simply means that it would lower any potential tax liability by up to $750.00. If you owed $1000.00 in taxes and claimed a tax credit of $750.00, you would only end up paying $250.00 in taxes). I know this all seems like a lot to take in, and it is, but we can sit down with you and explain it in more detail when the time comes to file your taxes.
What can I claim?
There are a lot of expenses that an individual can claim on their tax return to lower their tax liability. The common ones are prescription, optometry, dentistry, chiropractic, acupuncture, physiotherapy and amounts paid to a medical practitioner. What you may not realize, is the list doesn’t stop there. CRA has an extensive list of what you can and cannot claim here, here and here. If you have any questions about what may or may not be covered, contact us and we would be happy to answer any of your questions!
How do I claim the medical expenses?
Claiming medical expenses is easy. Collect them in an envelope for the year and when you meet with your tax professional, give them the envelope. They will sift through the expenses and ensure they are all eligible medical expenses and make an entry on your tax return. Alternatively, if you are doing your taxes yourself, your tax program will ask you if you have any medical expenses for the year. You are required to keep all the receipts for your medical expenses even after they are claimed on your taxes with your tax return. It’s best to keep them for 7 years in case CRA ever requests to see them.
Accountable Value Financial Services are experts with the medical expense tax credit. For over 8 years, Justyn Perry has worked with companies in administering Private Health Spending Accounts (also known as Health Spending Accounts) which utilizes the medical expense tax credit for eligible medical expenses. If you have any questions about this tax credit or PHSP’s/HSA’s, feel free to reach out to us.