Eldercare/CA PrimePlus Services
Part 4/6 - Medical Expenses Tax Credit

By Anne Chun, C.A., CFP

This is part 4 of a series of articles on Eldercare/CA PrimePlus Services*.

IIn part 1 of this series, which discussed the various tax treatments of medical related expenses, Medical Expenses were identified as a tax credit and not a tax deduction. In this article, we will focus on the details of the Medical Expenses Tax Credit.

There are a number of conditions you have to satisfy before the tax credit can be claimed. These include:

  • You or a legal representative must have paid for qualifying expenses within 12 months ending in the taxation year.
  • Expenses must have been paid on behalf of you, your spouse, dependant child or grandchild of your or your spouse, and any Canadian resident (at any time in the year) parent, grandparent, brother, sister, uncle, aunt, niece, or nephew of you or your spouse show was dependant on you at any time during the year.
  • Receipts can be in either spouse's name.
  • Expenses have not been reimbursed.
  • The same expenses have not been claimed in a previous taxation year.
  • Expenses incurred are not limited to those incurred in Canada.

If the above conditions are satisfied, you can claim a Medical Expenses Tax Credit calculated as the total of the medical expenses minus, the lesser of $1755 (for 2003 and indexed) or 3% of your net income. Since medical expenses for the family can be added together, a tax planning point is to have the lower income spouse claim the medical expenses as a tax credit. This will maximize the claim you can make. If you are claiming expenses incurred on behalf of your dependant who has a net income that is greater than the basic personal tax credit ($7756 for 2003 and indexed), an adjustment to the medical expenses tax credit has to be made. There are two ways to calculate the adjustment. You should determine if it is beneficial to claim your dependant's medical expenses. Depending on when the medical expenses were incurred, you can choose the most favourable 12-month period (which ends in the taxation year) if there is no overlap

Qualifying expenses are described in detail in subsection 118.2(2) of the Income Tax Act and some of these expenses are discussed below:

  • Payments to medical practitioners, and hospitals-these include payments to societies and associations for medical services rendered by their employees who are medical practitioners. For example, the Arthritis Society and the Victorian Order of Nurses.
  • Care of individual with mental or physical impairment-those who are eligible to claim the Disability Tax Credit (discussed in a separate article) can claim the remuneration for one full-time (equivalent) attendant, or the cost of full-time care in a nursing home provided that the attendant was at least 18 years of age and is not a spouse. There is no requirement that a nursing home be a public or licensed private hospital.

While the care need not be full time, it must be stressed that equipment, facilities or personnel specifically provided by the nursing home must be specifically tailored for the care of persons suffering from the physical or mental impairment in question.

  • Care in a self-contained domestic establishment-with a medical practitioner's certification, you can claim the remuneration paid to a full-time attendant who is at least 18 years of age and not a spouse. The medical practitioner has to certify that the patient is, and likely continue for a prolonged period of indefinite duration to be, dependent on others for personal needs and care, and as a result, requires a full-time attendant.
  • Care due to lack of normal mental capacity-the cost of full-time care in a nursing home qualifies provided there are receipts from the nursing home and a certificate from a medical practitioner. The medical practitioner has to certify that the patient, due to lack of normal mental capacity, is and apparently will continue to be dependent upon others for personal needs and care.
  • Care in an institution and care and training in a school-an appropriately qualified person has to certify that the patient who, by reason of a physical or mental impairment, requires the equipment, facilities, or personnel specially provided by that institution or school. The certification has to be specific. In the case of a school, it need not limit its enrolment to persons who require specialized care and training, or that some part of the expenses could be considered tuition fees. A patient suffering from an addiction to drugs or alcohol can qualify. Fees paid for a stop-smoking course or program do not qualify, unless, such a course or program is part of patient's medical treatment that is required because of a serious health deterioration problem and that is both prescribed and monitored by a medical practitioner.
  • Transportation and travel expenses of patient and accompanying individual-the cost of an ambulance to or from a public or licensed private hospital qualifies. Cost of a taxicab qualifies if the destination is at least 40 kilometres away and substantially equivalent medical services are unavailable within the patient's locality. If a taxicab is not readily available in an urgent situation, you can deduct reasonable expenses incurred for operating a vehicle to transport the patient. If expenses for transporting the patient are being claimed, it allows the same kind of expenses for transporting one individual who accompanies the patient provided that a medical practitioner has certified that the patient is incapable of travelling without an attendant.
  • Other reasonable travel expenses-if a patient has to travel to a place that is at least 80 kilometres away from the locality where he/she lives, provided that substantially equivalent medical services are unavailable within the locality, other reasonable travel expenses can be claimed. These include amounts expended for meals and accommodation for a patient and, where applicable, for an accompanying individual, and transportation costs. Transportation costs include vehicle expenses. For 1999 and subsequent years, you can use either the "detailed method" or the "simplified method" to determine reasonable meal and vehicle expenses. The onus is on you to show that the amount paid for lodging is necessary as a result of the distance travelled, or the condition of the patient for travel, and not solely for convenience.
  • Artificial limbs, aids and other devices and equipment-qualifying medical expenses relating to an artificial kidney machine include the costs of alterations to a home or the upgrading of the home's existing electrical or plumbing systems, provided they are reasonable and necessary for the installation of the machine. Operating costs of the machine also qualify; for example, repairs, maintenance, supplies, water and electricity to operate the machine and prorated costs of housing the machine such as property taxes, insurance, heating, lighting but not mortgage interest or capital cost allowance.
  • Products required because of incontinence-cost of diapers, disposable briefs, catheters, catheter trays, tubing or other similar products.
  • Eyeglasses-contact lenses, eyeglasses if prescribed. Laser eye surgery also qualifies.
  • Oxygen tents-the cost of buying or renting an oxygen tent and other equipment necessary to administer oxygen.
  • Guide and hearing-ear dogs and other animals-the costs to acquire and the care and maintenance costs including food and veterinary care of the animal are qualifying expenses if certain conditions are met.
  • Bone marrow or organ transplants-reasonable expenses, including legal fees and insurance premiums, paid to locate a compatible bone marrow or organ transplant donor for a patient and to arrange for the transplant are qualifying expenses. In addition, reasonable travel, board and lodging expenses paid for the donor and the patient and one other person who accompanies the donor and for one other person who accompanies the patient also qualify.
  • Renovations and alterations to a dwelling-in the case of an individual who lacks normal physical development or who has a severe and prolonged mobility impairment, reasonable expenses relating to the renovations or alterations to the individual's dwelling can be claimed.
  • Rehabilitative therapy-amounts paid for reasonable expenses relating to the rehabilitative therapy, including training in lip reading or sign language, incurred to adjust for the patient's hearing or speech loss qualify.
  • Preventive, diagnostic and other treatments-prescribed drugs, medicaments or other preparations or substances to be used in the diagnosis, treatment or prevention or a disease, disorder, abnormal physical state, or symptoms thereof, or in restoring, correcting or modifying an organic function.
  • Cost of laboratory, radiological and other diagnostic procedures or services-for maintaining health, preventing disease or assisting in the diagnosis or treatment of any injury, illness, or disability of the patient, as prescribed by a medical practitioner or dentist. Example of such expenses, which may not be covered by provincial health insurance, are expenses involved with artificial insemination such as the in-vitro fertilization procedure, daily ultrasound and blood tests, anaesthetist fees and cycle monitoring fees.
  • Dentures-as prescribed by a dentist, including the cost of making or repairing dentures by an authorized dental mechanic or denturologist.
  • Premiums to private health services plan-premiums for the individual, his/her spouse or member of the household with whom the individual is connected by blood, marriage or adoption. Premiums paid to provincial medical or hospitalization insurance plans do not qualify.
  • Starting with the 2003 taxation year, individuals who suffer from celiac disease (gluten intolerance) are entitled to claim the incremental costs of purchasing gluten-free (GF) products.

For other expenses that might qualify, refer to the Income Tax Act and Income Tax Regulations.

Starting with the 2002 taxation year, certain eligible individuals who live in retirement homes, homes for seniors, or similar establishments can claim attendant care expenses as a Medical Expenses Tax Credit. If you are eligible and did not make the claim, you can request an adjustment.

Next Part (Caregiver Amount Tax Credit)

*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".