Taxpayers may be entitled to a non-refundable tax credit on the medical expenses paid during the year. Medical expenses paid in respect of the taxpayer, their spouse or common-law partner, children under 18 years of age, and other dependants may be eligible for the credit. Understanding which amounts may be eligible for the credit and the documentation required to support a claim is an important step in preparing for your annual tax return.
The credit is broken down into two components. The first relates to medical expenses paid for yourself, your spouse or common-law partner, and your minor children. The amount eligible for this portion of the credit is calculated as the amount paid less the lesser of the following two amounts:
a fixed amount ($2,421 as of 2021, indexed annually); and
3% of your net income for the year.
The federal portion of the credit is 15% of the eligible amount calculated above. The amount of the provincial credit varies depending on your province or territory of residence on December 31.
The second portion of the credit is in respect of medical expenses paid for other dependants. Other dependants include individuals who meet the following criteria:
a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew of the individual or of the individual’s spouse or common-law partner;
dependent on the individual for support at some time in the year; and
a resident of Canada at some time in the year. (This residence requirement does not apply if the person is the child or grandchild of the individual or of the individual’s spouse or common-law partner.)
Whether these individuals are dependent on you for support needs to be assessed on a case-by-case basis. Generally, they must rely on you for the basic necessities of life such as food, clothing, and shelter on a regular and continuous basis. These individuals would often, but not always, reside with you during the year. Common situations in which an individual does not reside with you include an elderly dependent living in a care home or an adult child who is attending a post-secondary institution. The calculation of this credit is the same as the first portion of the credit except 3% of the dependant’s net income is used in the calculation.
The following conditions must be met to claim the amounts paid:
The medical expenses must be eligible medical expenses;
The medical expenses must have been paid or deemed to have been paid by either the individual or his or her legal representative;
The medical expenses must have been paid within any 12-month period ending in the calendar year. If the taxpayer died during the year, this period is extended to any 24-month period that includes the date of death;
The medical expenses must not have been claimed in the calculation of a credit, deduction or supplement in a previous year;
The medical expenses must be supported by receipts; and
In many cases, the medical expenses must not have been reimbursed or be reimbursable.
Eligible medical expenses include payments made to a medical practitioner, dentist, nurse or a public or licensed private hospital in respect of medical or dental services provided. The term medical practitioner is a very broad term that can apply to many professions. This term is dictated by provincial and territorial regulations and therefore expenses which are eligible in one province may not be eligible in another. Generally, there must be specific legislation which enables these practitioners to perform medical services and a governing body which regulates the field and sets and enforces basic standards of conduct. For example, massage therapists are regulated in five provinces as of 2021 (British Columbia, New Brunswick, Newfoundland, Ontario, and Quebec). Therefore, massage services provided by authorized practitioners in these provinces are eligible for the medical expense tax credit but not in the other provinces and territories not listed.
Medical or dental services are diagnostic, therapeutic or rehabilitative in nature, and performed by a practitioner acting within the scope of their professional training. The fees paid generally relate to existing illnesses or conditions rather than be preventative in nature. Services provided for cosmetic reasons typically do not qualify with some exceptions, such as breast reconstruction after a mastectomy.
Attendant care is another common eligible medical expense. Generally, you can claim the full amount paid for care in a nursing home, care in other schools or institutions, or a full-time attendant at home, in respect of an individual who is eligible for the disability tax credit, or for whom a medical practitioner has certified in writing that they require constant care due to a mental or physical infirmity. These facilities must provide 24-hour care. All fees paid in respect of food, accommodation, nursing care, administration fees, maintenance fees, and social programming and activities fees qualify. Fees for personal services, such as for hairdressers, do not qualify.
Salaries and wages paid for attendant care services provided at other facilities such as a retirement home or group home may also qualify for the credit. Other amounts paid, such as food and accommodation, do not qualify. Facilities typically provide detailed receipts providing a breakdown of the fees paid. Individuals must qualify for the disability tax credit to claim these amounts.
The amount of the eligible medical expenses for attendant care varies depending on the type of facility and whether the individual qualifies for the disability tax credit. You may be able to claim the full amount of the attendant care or the disability amount but not both, up to $10,000 of the care services (or $20,000 in the year of death) and the disability amount, or both the eligible expenses and the disability amount. This needs to be assessed on an annual basis to determine your eligibility and what is best for you. We would be happy to provide additional information on this separately.
A few other common examples of eligible medical expenses include prescription drugs, eyeglasses, ambulance fees, private health plan premiums, lab tests, devices such as wheelchairs, crutches, artificial limbs, and hearing aids, guide dogs or other service animals, transplant costs, alterations to your home for accessibility reasons, and fertility-related expenses. We would be happy to provide additional information and resources regarding eligible expenses as there are too many different examples and criteria to provide an exhaustive list.
Keeping documentation to support your claim is critical as Canada Revenue Agency frequently sends requests to provide supporting documentation. This includes invoices or receipts which support the amount of the expense, proof of payment, the date of the service, type of services provided, and the details of the authorized medical practitioner. You should also maintain documentation to support any reimbursements received, such as from your insurance provider.
For more information, please contact email@example.com or 1 844-GYTD-CPA