Tips in Claiming Medical Expense Credits

Medical expenses are the one out of pocket expenditure almost everyone has, and therefore it is the most commonly missed one as well.

Most tax filers are unaware of what the qualifiers are and there are complex rules regarding what qualifies, what doesn’t and who is eligible to claim them. In addition to being a non-refundable tax credit (NRTC), which reduces taxes payable, medical expenses also qualify as a refundable credit for some. In this first in a series, Knowledge Bureau Report explores the details behind the claiming of medical expenses.

Who: Any taxpayer can claim medical expenses as a non-refundable tax credit, as long as they adhere to the limitations imposed by the government. The credit itself will only be of benefit, though, if the taxpayer is taxable. 

Taxpayers can claim medical expenses on Line 33099 for themselves, their spouse or common-law partner, and their dependants that are under the age of 18. Additionally claims can be made on Line 33199 for dependants over the age of 18, provided they rely on the taxpayer for support.

For a deceased taxpayer, medical expenses can be claimed for a 24 month period that includes the date of death, as long as the expenses were not claimed in a prior year. Otherwise the claim is made for the best 12-month period ending in the tax year.

The claim for medical expenses is also limited to the lesser of 3% of the taxpayer’s net income or a maximum threshold amount which is set at $2,759 for 2024. This threshold is indexed annually. For example, if a taxpayer’s net income is $30,000, they would only qualify for medical expense claims once the expenses exceed $900 (3% of $30,000). However, if a taxpayer has a net income of $100,000, the threshold of $2,759 would apply, not the 3% $100,000 or $3000.

When: A taxpayer may claim medical expenses that were incurred and not reimbursed for either the calendar year of the tax return or for any 12 month period ending in the tax year, provided that there is no overlap on medical expenses claimed in the prior year. This can be particularly beneficial for individuals who have high medical expenses at the end of one calendar year and again at the beginning of the next year.

Where: Medical expenses can be claimed if they were paid (and not reimbursed) to qualified medical practitioners and treatments in Canada as well as abroad. Any amounts paid must be reported in Canadian Dollars on the tax return in that case.

Why: Medical Expenses can only be claimed if they meet specific criteria. CRA’s Medical Expense Guide (RC4065) clearly outlines the various medical expenses that qualify. For many claims, a letter or prescription from a medical professional must be available to support the expense. Pharmaceutical medications can only be claimed if the medication is purchased through a pharmacist in Canada and if a prescription for that medication has been issued. Over-the-counter medication as well as vitamins and supplements are never deductible with the exception of Vitamin B12, which in certain situations is claimable with a prescription. Additionally, any amounts that has been or will be reimbursed cannot be claimed.

How: The medical expenses of the entire family are added together and the 3% threshold or $2,759, whichever is lower, is subtracted from the total. This amount is then multiplied by 15% to calculate the NRTC available at the federal level. This amount is then deducted from the tax payable on taxable income. It is important to note that the result of this calculation can never be less than $0; a NRTC can never create a refund.

When the provincial tax calculations are added, a further benefit is calculated.

Generally speaking, for married or common-law partners, it is most beneficial for the lower income earner to claim the medical expenses, because of net income limitation. However, tax preparers must carefully examine the tax returns to ensure that the credit is not wasted. If the lower income earner has enough credits to reduce their tax payable without the medical expenses, it may be more advantageous for the higher income earner to claim the expenses instead, or to carry the expenses forward to use in a best 12-month period ending next year.

If a taxpayer is claiming the medical expenses of a dependant over 18 year of age, the medical expenses are reduced by 3% of the dependant’s net income before calculating the NRTC.

Other Factors to Consider:

Refundable Medical Expense Supplement: This supplement is designed to help lower income taxpayer who may be able to claim a refundable tax credit of up to $1,464 for 2024, provided they have employment income or net self-employment income.

To qualify, the taxpayer must meet all of the following criteria:

• have medical expenses (Line 33200) or is claiming the Disability Supports Deduction (Line 21500)
• was a resident of Canada throughout the year,
• was 18 years of age of older at the end of the tax year
• have adjusted family net income of less than $61,699
• must have employment or self-employment income of $4,275 or more

The credit will be reduced by 5% of the taxpayer’s net income in excess of $32,419 for 2024. Tax filing software will automate those calculations.

A Double-Dip: Home Accessibility Tax Credit (Line 31285): Any qualifying medical expenses that are claimed on this line may also be claimed as medical expenses for the purpose of the medical expense tax credit.

No Double-Dip: Disability Supports Deductions (Line 21500) & Multigenerational Home Renovation Tax Credit (Line 45355): Any qualifying medical expenses claimed on either of these lines may not be claimed again as medical expense tax credit.

The Bottom Line: Many medical expenses, including costs for supplies and services, are deductible on your tax return. To claim these expenses, you must provide thorough documentation. This typically includes a prescription, a letter from a medical practitioner and receipts of payment. Sometimes medical reports may be required.

The CRA closely audits medical expense deductions, so it's crucial that your documentation is thorough, well-organized, and easy to follow, should the CRA request it. Incomplete or unclear documentation will result in the denial of your claim. Join us next week as we dive deeper into the details of allowable medical expenses.

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