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
- 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
- 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
- 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.
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".