Though Canadians are fortunate to have universal health care, medical bills can still add up. Things like physiotherapy, massage therapy and prescriptions are just some examples of the things generally not covered under the Canadian health care system.
The good news is that Canadians can claim eligible medical expenses on their yearly taxes. Claiming these expenses could save you hundreds, if not thousands of dollars a year. Understanding how much you can claim and the claims process is crucial to maximize your benefits. This article will explain what medical expenses are eligible and the proper way to claim them so that you can best reduce your financial tax burden.
Understanding Medical Expense Tax Credit (METC)
The way to claim medical expenses on your taxes in Canada is via the Medical Expense Tax Credit (METC). This is a non-refundable tax credit that helps Canadians reduce their tax payable by claiming eligible health expenses. This credit is available for a wide range of medical costs not reimbursed by your provincial or territorial health plan. The federal tax credit works out to be about 15% of eligible expenses.
Eligible Medical Expenses
It’s essential to be aware that not all medical costs can be claimed as a tax credit. Here are some examples of eligible medical expenses:
- Prescription medications
- Dental services and vision aids
- Medical devices (e.g., hearing aids, glasses)
- Certain medical treatments or surgeries not covered by provincial health plans
- Travel expenses for medical treatment (under certain conditions)
- Home renovations for accessibility (under certain conditions)
- In some circumstances, you may even be able to claim nursing home expenses.
Note also that even when an expense is allowed, the government may require a note from a healthcare professional or a prescription to confirm that the medical aid was necessary. You may be asked to provide this documentation from the CRA so it’s essential to keep good records and put your receipts and doctor’s notes in a safe place.
For a detailed list of eligible expenses, check out the Canada Revenue Agency (CRA) website. It’s worth taking a look at the list of acceptable expenses on the government’s website. Don’t assume that something isn’t eligible. You might be surprised at what the government allows, for example, air filters, computer aids, and even air conditioning in some specific circumstances. Another expense that is often missed but for which you’re allowed to claim is travel expenses to a medically necessary treatment, such as chemotherapy. You may even be able to claim caregiver travel expenses. It always pays to check the website to see what expenses are allowable.
Non-Eligible Medical Expenses
Nobody wants to get on the wrong side of the Canadian Revenue Agency, so it’s wise to be aware of medical expenses that can’t be claimed. Here are just a few examples:
- Fitness club membership
- Blood pressure monitors
- Organic food expenses
- Diaper delivery service
- Over-the-counter medications
Who Can Claim The Medical Expense Tax Credit
Once you’ve figured out what health-related items you’re allowed to claim, you have to be sure you’re eligible to claim the expenses.
In general, you can claim medical expenses on behalf of:
- Yourself
- Your spouse or your common-law partner
- Any dependents, meaning your or your spouse’s/common-law partner’s children under 18 years of age.
- You may even be able to claim credits for other dependents, such as dependents over the age of 18, as well as parents or grandparents, siblings and nieces and nephews if they relied on you for support in the tax year (though you will make the claim on a different line of your tax refund; more on that below).
It’s vital to note that you can only claim expenses that have not been reimbursed by a private health plan. If you’ve been partially reimbursed for a medical expense the remaining amount can be put toward your total medical expenses. So, for example, if you paid $500 for physiotherapy for the year and your private health care provider reimbursed you for $300, you can claim the remaining $200.
How Much Can You Claim?
There are strict rules about the exact amount you can claim on your taxes in Canada for the medical expense tax credit. The amount of expenses you can claim depends on a few factors, including the total amount spent on eligible costs and your net income.
Here’s the formula that the CRA uses on your tax form to figure out how much you’re allowed to claim:
Subtract the lesser of 3% of your net income or $2,635 (for the 2023 tax year; this threshold amount changes yearly based on inflation).
The result is the amount you can claim for the tax credit.
So, for example:
Let’s say your net income is $50,000, and you spent $3,000 on eligible medical expenses in the 2023 tax year.
3% of your net income is $1,500.
Since $1,500 (3% of net income) is less than $2,635, you would subtract $1,500 from your total medical expenses: $3,000 – $1,500 = $1,500. (Remember you must only subtract the lesser of 3% of your net income or $2,635).
Therefore, you can claim $1,500 for the medical expenses tax credit.
The process is the same if you’re claiming a dependent’s medical expense tax credit (though you would enter that on a different line of your tax return; more details on that below).
How To Make A Claim For The Medical Expense Tax Credit
To claim the credit, fill out lines 33099 (the line you use for your expenses and dependents under 18 years old) and 33199 (for your other eligible dependent’s expenses who are not your children or who are 18 or above) of your tax return. Here’s a step-by-step guide:
- Gather all the receipts for eligible medical expenses.
- Calculate the total amount of your eligible expenses.
- Then, determine if you need to use the lesser of 3% of your net income or $2,635 (for the 2023 tax year).
- Subtract the amount you get from step 3 from your total eligible expenses.
- Enter the result on line 33099 of your tax return.
- If you’re claiming expenses for other dependents, enter those amounts on line 33199.
The CRA’s website provides detailed instructions for this calculation process. If you’re using tax software, it will guide you through these steps and do the calculations for you.
Provincial And Territorial Medical Tax Credits
This article has focused mainly on federal medical expenses because it’s a standard rate that all Canadian taxpayers can receive. However, every tax-paying Canadian is also eligible for a provincial or territorial tax credit on top of their federal credit. The amount you’re eligible for will depend on where you live. For example, in Ontario, eligible taxpayers could receive up to an additional 5.05% credit on top of their federal credit.
The process is similar to claiming the federal credit, but the specific rules and amounts vary depending on your province or territory. Here’s a brief look at how the process works:
- First, figure out your federal medical expense tax credit by entering your total eligible medical expenses on line 33099 (or line 33199) of your federal tax return.
- Then, you can claim the corresponding provincial or territorial tax credit on line 58689 of your provincial or territorial Form 428.
- The amount you can claim provincially or territorially is based on the same medical expenses you claimed federally. However, each province and territory has its own tax credit rate that is applied to your eligible medical expenses to determine the amount of your provincial or territorial credit. Check the government website to see the credit rate for your region.
It’s important to note that Quebec has its own separate provincial tax return and medical expense credit calculation.
Tips
Here are some tips to help you make the most of your medical expenses tax credit.
- Keep your receipts: Maintain detailed records and receipts of all medical expenses in case the CRA requests them.
- Check for updates: The list of eligible expenses and the annual adjustment amount can change from year to year, so always check the CRA’s website for the most up-to-date information. If you use tax software, the annual adjustment will be updated automatically.
- Expenses from previous years: If you have medical expenses that you didn’t claim in a previous year, you may be able to carry them forward to the current tax year.
- Private medical insurance premiums: If you pay for a private medical plan to cover health expenses not paid for by your province or territory, you may be able to claim those costs.
- Who claims the expense: Either person in a marriage or common-law relationship can claim the tax credit for medical expenses. It’s usually wise to let the person with a lower income claim the expenses because they will have a lower threshold and thus will get a larger credit.
Final Thoughts
Claiming medical expenses on your taxes in Canada has the potential to significantly reduce your tax owing. Understanding what expenses are eligible and how to calculate your claim is the key to maximizing your tax credit. Always keep detailed records and receipts and consult the CRA’s guidelines or speak with a tax professional if unsure about what specific expenses are allowed. By understanding how the medical expenses tax credit works, you can ensure you’re getting the most out of your tax return.
