Medical expenses often overlooked as tax deductions
Everything from gluten-free food to medical marijuana can be claimed as a medical expense
Most people are aware they can claim some medical expenses on their tax return, but many don't keep a running tally because they simply forget or don't think it will add up to worthwhile savings. That's a potentially costly mistake, say tax experts.
"I put it down as being one of the most well-known and least-utilized [tax credits]," says Alan Rowell, tax specialist and president of Hamilton, Ont.-based Accounting Place.
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The tax credit applies to any number of medical expenses — including prescription drugs, eyeglasses, health-related home renovations, dental work and even buying gluten-free bread or medical marijuana.
"If you don't start adding them up, you'll never know," said Rowell.
The list of medical expenses eligible for a tax credit is exhaustive, and we have highlighted some the less familiar ones below.
For the 2014 tax year, the government has added two items to the list of eligible medical expenses: the cost of service animals used to help manage severe diabetes and the cost of mental or physical therapy for persons eligible to claim the disability tax credit.
The caveat of claiming any medical expense is that the government automatically deducts the lesser of either $2,171 or three per cent of your net income from a person's total medical expenses. For some, that means the credit might be negligible or even nonexistent, but for others it's definitely worthwhile to make a claim.
You do need to do some homework, in terms of keeping your medical expense receipts. It's something that is not easy to do over the course of a year unless you make a conscious effort to put the receipts aside, Rowell says.
For those who make the effort, anything over the amount automatically deducted by the Canada Revenue Agency means money in your pocket.
However, that means you must use the same period when claiming medical expenses for your dependants.
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Another time-saver that Rowell recommends is to contact your local drugstore — where you usually get prescriptions — to see if they can provide one single receipt for the whole year, thereby avoiding the hassle of compiling 12-months worth of receipts.
There is also a refundable tax credit for working people on low incomes who have high medical expenses, and a deduction for medical expenses incurred in order to enable a disabled person to work or attend school. The disability supports deduction applies to expenses such as sign-language interpretation services and Braille printers.
Disability tax credit not negligible
Another of the most-often overlooked credits is the disability tax credit — which coincidentally happens to be the most lucrative non-refundable tax credit, worth up to $2,500 in real money depending on the province of the tax filer, with additional amounts of $680 federally and from $181 to $1,030 provincially for a taxpayer with a disabled child under 18.
The credit is intended for those with serious and prolonged physical or mental impairments. To be eligible, the disability must markedly or significantly restrict activities of daily living, including walking, eating, speaking or some combination thereof. A physician or licensed practitioner must complete and certify the medical section on form T2201.
Rowell says part of the reason it is often missed is because it is poorly named.
"I think they should call it a restricted quality of life tax credit, because I think that's really what it is," he says.
Knowing what to claim
While most tax software programs do a good job of prompting you about available credits and deductions, they don't necessarily take into account all the specifics of your particular situation. They will ask you about medical expenses, but you still have to know what expenses to claim.
The disability tax credit can be claimed retroactively up to 10 years if a person has been experiencing eligible impairments but has only now applied for the credit. That can add up to a major tax refund.
The credit can also be transferred to a spouse or other family member, he adds.
Rowell recommends a person speak with their doctor if they think they might qualify for the disability tax credit.
"It's one of those things," he says. "If you don't ask, you don't get."
Good advice for anyone looking to reduce the amount of tax they have to pay each year, medical expenses included.
Some eligible medical expenses
It appears the CRA has dealt with every possibility for health care expenses, which has made for a wide range of products and procedures that can be claimed. Some you may know, some you should know and some are downright surprising. Below is a list of some of the treatments, devices and procedures that qualify as medical expenses.
Air conditioner — The lesser of $1,000 and 50 per cent of the amount paid for the air conditioner for an individual with a severe chronic ailment, disease, or disorder — prescription required.
Animals — The purchase, care and maintenance costs of a specially trained animal to help someone who is blind, deaf, has a severe physical impairment, autism, epilepsy or severe diabetes. Expenses for those with diabetes must have been incurred after 2013.
Attendant care expenses — Attendant care expenses are amounts you or your spouse or common-law partner paid for attendant care or care in any of the following places:
- Self-contained domestic establishments.
- Retirement homes, homes for seniors, or other institutions.
- Nursing homes (full-time care).
- Special schools, institutions, or other places (providing care or care and training).
- Group homes in Canada.
Bathroom aids — To help a person get in or out of a bathtub or shower or to get on or off a toilet — prescription required.
Bone marrow transplant — Reasonable amounts paid to locate a compatible donor to arrange the transplant, including legal fees and insurance premiums, and reasonable travel costs, including board and lodging for the patient, the donor and their respective companions.
Cosmetic surgery — Generally, expenses for purely cosmetic procedures are eligible only if incurred before March 5, 2010. An expense will continue to qualify as a medical expense if it is necessary for medical or reconstructive purposes, such as surgery to address a deformity related to a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.
Eyes — Eyeglasses, contact lenses or other vision devices for the treatment of vision correction, and artificial eye — prescription required.
Furnace — The amount paid for an electric or sealed combustion furnace to replace a furnace that is neither of these, where the replacement is necessary because of a person's severe chronic respiratory ailment or immune system disorder — prescription required.
Gluten-free food — People with celiac disease who have been prescribed a gluten-free diet by a medical practitioner can claim the difference in cost between gluten-free and non-gluten-free products as a medical expense.
Hospitals services — Public or private, that are designated as hospitals by the province, territory or jurisdiction where they are located.
In vitro fertility program — Paid to a medical practitioner or a public or licensed private hospital, not including donations to a sperm bank.
Medicinal marijuana — The cost of medical marijuana or marijuana seeds can be claimed as a medical expense as long as the individual is authorized to possess the drug and the marijuana was purchased from Health Canada or someone licensed to produce medical marijuana. This does not include costs associated with the growing of marijuana.
Orthodontic work including braces — Expenses for purely cosmetic procedures are not eligible.
Scooter — The amount paid for a scooter that is used in place of a wheelchair.
Tests — The cost of medical tests such as cardiographs, electrocardiograms, metabolism tests, radiological services or procedures, spinal fluid tests, stool examinations, sugar content tests, urine analysis, and x-ray services. Also claim the cost of any related interpretation or diagnosis — prescription required.
Travel expenses — If medical treatment is not available to you within 40 kilometres from your locality, you may be able to claim the cost of public transportation (for example, taxi, bus, or train) to get the treatment somewhere else. However, if public transportation is not readily available, you can claim vehicle expenses to get medical treatment. In addition, if you have to travel more than 80 kilometres (one way) from your locality for medical treatment, you may be able to claim the cost of your meals and accommodations. You can also claim travel expenses for someone to accompany you if a medical practitioner certifies in writing that you are unable to travel without assistance.
Walking aids — The amount paid for devices designed exclusively to help a person who has a mobility impairment to walk — prescription required.
Water filter, cleaner, or purifier — The amount paid for a person to cope with or overcome a severe chronic respiratory ailment, or severe chronic immune system disregulation — prescription required.
Whirlpool bath treatments — The amount paid to a medical practitioner. A hot tub that you install in your home, even if prescribed by a medical practitioner, is not eligible.
Wigs — The amount paid for a person who has suffered abnormal hair loss due to a disease, accident, or medical treatment — prescription required.
The full list of eligible expenses can be found at the CRA website. It's user-friendly and arranged alphabetically.
Expenses that do not qualify
There are a number of expenses that are commonly claimed as medical expenses but don't qualify. Here is the complete list of non-eligible expenses list from the CRA.
Athletic or fitness club fees.
Birth control devices (non-prescription).
Blood pressure monitors.
Cosmetic surgery — Expenses for purely cosmetic procedures, including any related services and other expenses such as travel, incurred after March 4, 2010, cannot be claimed as medical expenses. Both surgical and non-surgical procedures purely aimed at enhancing one's appearance are not eligible.
There are a number of expenses that people commonly try to claim as medical expenses but which don't qualify.
- Hair replacement procedures.
- Botulinum injections.
- Teeth whitening.
An expense, including those identified above, may qualify as a medical expense if it is necessary for medical or reconstructive purposes, such as surgery to address a deformity related to a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.
Health plan premiums paid by an employer and not included in your income.
Vitamins, and supplements, even if prescribed by a medical practitioner.
Personal response systems such as Lifeline and Health Line Services.
Travel expenses for which you can get reimbursed.
Premiums paid to the following provincial and territorial plans:
- Alberta Health Care Insurance Plan.
- Manitoba Health Plan.
- Medical Services Plan of British Columbia.
- New Brunswick Medicare Division of Provincial Department of Health.
- Newfoundland Medical Care Plan.
- Northwest Territories Health Insurance Services Agency of Territorial Government.
- Nova Scotia Medical Services Insurance.
- Ontario Health Insurance Plan.
- Prince Edward Island Health Services Payment Plan.
- Quebec Health Insurance Board (including payments made to the Health Services Fund).
- Saskatchewan Medical Care Insurance Plan.
- Yukon Territorial Insurance Commission.