Eldercare/CA PrimePlus Services
Part 1/6 - Medical Related Expenses

By Anne Chun, C.A., CFP

This is part 1 of a series of articles on Eldercare/CA PrimePlus Services*.

In this article, we will examine a number of tax treatments for medical related expenses. Future articles will deal with each tax treatment in greater detail.

Qualified medical expenses can be divided into those expenses you incur for yourself, your spouse, or for your dependants. In general, some expenses qualify as a tax deduction and others a tax credit. The tax treatments are quite confusing as some expenses are transferable and others are not. There may be income tests that will reduce the tax benefit available.

The tax savings are different for tax deductions versus tax credit. A tax deduction will reduce your tax at the rate of your tax bracket whereas a tax credit will reduce your tax at the lowest tax rate. Therefore, for those whose taxable income is greater than $35,000 in 2004, a tax deduction will save you more tax than a tax credit. Furthermore, if you do not have any taxable income, a tax credit creates no tax savings.

In this article, we will focus on a general discussion of the following:

  1. Attendant Care Expenses Tax Deduction
  2. Disability Tax Credit
  3. Medical Expenses Tax Credit
  4. Caregiver amount Tax Credit

Attendant Care Expenses are tax deductions subject to an income test. These expenses are not transferable and can only be claimed by the taxpayer if he/she also qualifies to claim the Disability Tax Credit.

The Disability Tax Credit is a tax credit and not a tax deduction. It can be claimed by the taxpayer or transferred to qualified relatives. If certain conditions are met, the taxpayer can claim the Disability Tax Credit and, either the Attendant Care Expenses or the Medical Expenses (up to a limit for an attendant).

Medical Expenses are a tax credit and not a tax deduction. Expenses for the taxpayer and his/her family can be grouped together and claimed by one person. Medical Expenses for any twelve-month period ending in the taxation year can be claimed. The tax credit is subject to an income test.

Caregiver amount is a tax credit that is available to a person who has provided home care for a parent or grandparent (65 or older), or to an infirm dependant (18 or older).

Next Part (Attendent Care Expenses)

*CA PrimePlus Services is a registered trademark of the Canadian Institute of Chartered Accountants. Eldercare/CA PrimePlus Services is a customizable range of financial management services for elderly and disabled persons.

Anne Chun, C.A. CFP is the principal of Anne Chun Professional Corporation, providing financial, tax, estate and Eldercare services. She is also the co-author of "Planning your Financial Future".