By Anne Chun, C.A., CFP
In this article, we will examine a number of tax treatments for medical related expenses.
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. Furthermore, if you do not have any taxable income, a tax credit creates no tax savings.
In this article, we will briefly discuss the following:
- Attendant Care Expenses
- Disability Tax Credit
- Medical Expenses
- Canada Caregiver amount
Attendant Care Expenses are available to persons who are eligible for the Disability Tax Credit. These expenses are not transferable and can only be claimed by the taxpayer.
The Disability Tax Credit is a tax credit. 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.
Canada Caregiver amount is a tax credit that is available to a person who has provided care for a spouse, partner or infirm dependents over age 18.
* 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”.