Medical Expenses: Will PPE Costs be Deductible?

Evelyn Jacks

Yesterday, Canada’s Chief Public Health Officer Theresa Tam announced that Canadians should be wearing triple-ply non-medical masks when in shared indoor spaces with people from outside of their immediate household, and when in close contact with others in public. It begs the question, will Personal Protective Equipment (PPE) and other health related costs be deductible? The answer is, it depends.     

It’s an important question for the times as the second wave of the pandemic rages around the world. To answer it, we have to take the perspective of 3 tax filer profiles: individuals, employees, the self-employed.

Under current rules, individuals would not likely be able to deduct PPE and hand sanitizer using the supplies for personal use as a medical expense, unless the government directs differently in the months to come.  Under current rules, allowable medical expenses must be prescribed by a doctor or on a prescribed list of allowable expenses published by the CRA.  We’ll discuss some of the pandemic-related medical expenses that could be deductible later.

However, supplies used up in the course of employment or self-employment activities may be deductible as an employment/self-employment expense.

Employees can deduct the cost of supplies used up in the course of their employment, when certain conditions are met.  Supplies are defined by CRA as those materials that are used directly by employees in their work and for no other purposes.  Employees must personally pay for these costs, their contract of employment must require them to provide and pay for the supplies, and these supplies cannot be reimbursed in the future by the employer. In addition, the supplies must be used directly in their work and Form T2200, Declaration of Conditions of Employment, must be completed and signed by the employer.

At tax audit time, it will be up to employees to demonstrate to CRA tax auditors that the supplies were used directly in their work, rather than just for personal use, which may be a tough task. That signed form T2200 must also be on hand.

For the self-employed who providePPE and sanitizer in the course of keeping a safe workplace for employees and customers, a tax deduction for the costs would be reasonable.

As mentioned, individual taxpayers may also claim certain “prescribed medical costs” that arise as a result of COVID as medical expenses. Consider the following list of prescribed medical devices and equipment from the CRA:

• A device or equipment, including a replacement part, designed exclusively for use by an individual suffering from a severe chronic respiratory ailment or a severe chronic immune system disregulation, but not including an air conditioner, humidifier, dehumidifier, heat pump or heat or air exchanger.
• An air or water filter or purifier for use by an individual who is suffering from a severe chronic respiratory ailment or a severe chronic immune system disregulation to cope with or overcome that ailment or disregulation.
• An electric or sealed combustion furnace acquired to replace a furnace that is neither an electric furnace nor a sealed combustion furnace, when the replacement is necessary solely because of an individual's severe chronic respiratory ailment or a severe chronic immune system disregulation.
• A device or equipment designed to pace or monitor the heart of an individual who suffers from heart disease.
• A wig made to order for an individual who has suffered abnormal hair loss because of disease, medical treatment or accident.
• A needle or syringe designed to be used for the purpose of giving an injection.

Medical expenses are claimable in the best 12-month period ending in the tax year.  These amounts must be reduced by 3% of net income; so, it often makes sense to claim medical expenses on the return of the spouse with the lower taxable income, so long as taxes are payable.  Other commonly missed medical expenses include the following:

Costs paid to Medical Practitioners: including a dentist, a medical, a medical practitioner, an optometrist, a pharmacist, a psychologist, a speech-language pathologist, an osteopath, a chiropractor, a naturopath, a psychologist, a qualified speech-language pathologist or audiologist, an acupuncturist, a dietician, a dental hygienist, a nurse including practical nurses whose full-time occupation is nursing; or a Christian science nurse, an audiologist.

Medical Treatments:

Financial Health Care Planning.  Financial advisors and tax accountants can work together to help their clients better understand what’s deductible for tax year 2020, and by whom. More important, they can bridge that discussion to a tax-efficient health risk management plan, which driven by a tax-efficient financial plan.  Here are some conversation starters:

Future Needs Analysis - Steps To Planning for Health Independence:

• Understanding financial implications of chronic illness
• Family history and lifestyle
• Specific wishes
• Financial readiness – net worth statement, tax returns, health risk management plan

Immediate Objectives: Health Risk Management

• Understanding government rules and benefits
• Considering long term care requirements
• Planning for care options and their costs
• Understanding tax implications

Evelyn Jacks is the author of 55 books on personal tax planning, filing and personal wealth management and Founder and CEO of Knowledge Bureau.  She will discuss year-end tax planning opportunities at the November 18 Virtual CE Summits.