Did you incur any medical expenses in 2019? Perhaps you are getting ready to put everything together for your 2019 personal tax return, and are preparing a list of medical expenses eligible for deduction. Will these medical expenses even make a difference to your tax bill? Let’s dive in!
How much Medical Expenses are Eligible for Deduction?
Three Percent Rule
The majority taxpayers expect to receive a deduction for every dollar spent on medical bills. However, the amount that you are able to claim depends on your income. The medical expense credit is designed to assist Canadians with the burden of large expenses throughout the year. However, only a portion are deductible. Adding up your total medical expenses for the year, the deductible amount is either 3% of your net income or the maximum amount set for the tax year, which ever is lesser.
For example, if your net income was $30,000 and the maximum tax credit for the corresponding year is $2,352 (2019), the first $900 dollars will not be eligible for a medical tax credit. However, if your total medical expenses were $1,500, $600 would be your medical tax credit amount for the year 2019.
Whose Medical Expenses Can I Claim?
An individual can claim medical expenses for themselves or on behalf of their spouse or any other dependent family member. This includes children, grandchildren, parents, grandparents, brothers, sisters, uncles, aunts, nieces or nephews, or any of these relatives of a spouse.
Which Spouse Should Claim the Medical Expenses?
Either the individual or the spouse can opt to claim the medical expenses, depending on who can maximize the credit. For example, if A’s net income was $60,000 and his spouse, B’s income is $40,000, A’s deductible would be $1,800 while B’s deductible would be $1,200. The larger benefit would be for A to claim the medical expenses as it’s greater by $600.
Twelve Month Rule for Medical Expenses
What makes medical expenses different to other expenses is that you can choose your own 12-month period, as long as the end of the 12-month period falls within the reporting year. This allows you the flexibility to pick the most suitable 12-month time frame depending on your medical expenses amounts.
That way you could maximize your medical expense credit as it will only be eligible to the 3 percent rule. You can also alter the 12-month period for the future years. However, only certain medical expenses are eligible to be deducted from your personal income taxes which are categorized as non-refundable tax credit.
What Medical Expenses Can I Claim?
An extensive list of expenses that are available for deductions on the CRA website, click here. The following are the most common ones:
- Payments to medical practitioners, dentists and registered nurses
- Prescription drugs
- Eyeglasses frames and lenses
- Hospital fees not covered by public health insurance
- Nursing home
- Medical Services provided outside of Canada
If you think that you incurred enough expenses that you will have medical expenses eligible for deduction on your 2019 personal tax return after applying the three percent rule, then make sure you claim them! Reach out to our team of personal tax preparation experts if you have any questions.