Tips to cash in on medical expense tax credits: If you are looking for a
way to save tax for 2013, try the medical expense tax credit. This can save you
tax dollars, but the calculations are often tedious. Start working on your
claim well before April 30.
How much tax can you save? For example, suppose you have a net income of $50,000. What amount of medical expenses would you need to make a worthwhile claim? You'd need at least $1,500 in medical expenses to reach your three per cent threshold before any tax credits can be claimed at all.
Generally, for every $100 of medical expenses in excess of three per cent of your net income you can save $26 (using Saskatchewan rates) for 2013. Assume your medical expenses were $2,500 in total for 2013. Having $1,000 of expenses that exceed your $1,500 threshold means you'd save $260 tax.
If you only have $1,550 of medical expenses, with only $50 over the threshold, you'd save $13, which may not make the effort worthwhile, especially if you are paying an accountant by the hour.
Definitions what qualifies as a medical expense? Do an online search for "CRA medical expenses." You will find a web page listing 116 headings, ranging from attendant care to wheelchairs.
Eyeglasses count. Dental work counts, but not teeth whitening. Claim prescription drugs, but don't claim vitamins or supplements. Rehabilitative therapy is eligible. Fitness club fees are not eligible.
Did you pay for private health insurance coverage in 2013? That includes health insurance for out-of-country travel. Claim your premiums as a medical expense. Did your employer provide group health insurance such as a dental plan? When your employer provides such non-taxable benefits you cannot claim the premiums as a medical expense. Employees can only claim employee paid premiums. Check Box 85 of your T4 slip.
Similarly, retirees should check box 135 of their T4A slips for health insurance premiums deducted from employer pension payments.
Review your dental and health insurance claim forms. For each medical service listed, deduct the amount of reimbursement from the total cost. Claim only the unreimbursed portion as a medical expense on your tax return.
Medical travel costs Do you reside in a rural area, with no medical practitioners located within 40 kilometres of home? You can claim the cost of travelling to obtain treatment. Click on the "travel expenses" link on the CRA webpage. Use the simplified method to claim 45.5 cents per kilometre for trips starting in Saskatchewan.
To support your claim, list the dates of your trips and treatment locations. Describe the service (dental or physiotherapy, for example). State the medical practitioner's name. State the distance for each round trip. Claim $17 per meal and parking receipts if you had to travel at least 80 kilometres (each way) from your home.
Did you obtain treatment outside of Canada? Keep receipts for the medical service, travel and hotel costs. Convert receipt amounts to Canadian dollars.
Did you move into an assisted living retirement home because you had difficulty with daily living activities? If you are eligible for the disability tax credit, then limited amount of attendant care costs, such as food preparation, housecleaning and laundry services can be claimed as a medical expense. Your retirement home should provide a receipt breaking down rent into eligible and non-eligible services.
What if your employment income was so low in 2013 that you don't need to claim any medical expenses to eliminate tax owing? For example, suppose you had $10,000 of wages and paid $5,000 for dental work. Claim those medical expenses. You can receive a $1,142 tax refund because of the Refundable Medical Expense Supplement.
Terry McBride, a member of Advocis, works with Raymond James Ltd. (RJL). The views of the author do not necessarily reflect those of Raymond James Ltd. (RJL). Information is from sources believed reliable but cannot be guaranteed. This is provided for information only.
Securities offered through Raymond James Ltd., member of the Canadian Investor Protection Fund. Insurance services offered through Raymond James Financial Planning Ltd., not a member of the Canadian Investor Protection Fund.