Blog

Mark Feldstein & Associates Tax Accounting Blog

Taking Care of Medical Care

The first (and most important) rule when discussing medical expenses and tax claims is that only medical expenses that the Canada Revenue Agency (CRA) has determined to be eligible may be claimed for tax purposes. A full and complete listing can be found at the link listed here (hyperlink this to http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/llwbl-eng.html ).

Eligibility

As a general rule, most over the counter drugs purchased without a prescription from a medical practitioner are usually not eligible to be claimed. The CRA generally only allows medical expenses of a nature specific to the individual, which is supported by a prescription or similar doctor’s order document. As a result, people cannot write off vitamins, generic drugs, and bandages as medical expenses, unless supported by a written prescription or official prescription receipt from the pharmacy.

Additionally, there are many items which the CRA has flatly disallowed to be claimed as a medical expense. A list of these items can be found here (hyperlink to http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/ntllwbl-eng.html ).

3% Threshold

Another point of importance is that the total cost of a family’s medical expenses must exceed the lessor of the following two items for 2012 tax returns

  1. 3% of the net income of the lower earner spouse, or
  2. $2,109

If your family’s medical expenses total less than the lessor of the above, then none of the medical claim is eligible for tax purposes.

Reporting Period

Medical expenses for the tax year are generally claimed within a 12 month period which is, by default, January 1st to December 31st of each year. However, it is possible that the taxpayer wishes to claim a significant medical expense paid in a period that falls outside of this time frame. To allow for this, the CRA permits taxpayers a one-time option to change their medical reporting period from the above calendar year to another 12 month period of their choosing. However, if the taxpayer chooses to change their filing period, they are not allowed to change the filing period again. They must keep this filing period each year going forward on their tax return indefinitely.

Who Can Claim?

For 2012, you can claim medical expenses for the following people in your family:

  1. Yourself
  2. Your spouse or common law partner
  3. You or your spouse/common law partner’s child, who was born in 1995 or later

Furthermore, there may be other people that you paid medical expenses for who are not directly related to you, even though they may be dependent on you for support.  These people include your or your spouse/common law partner’s:

  1. Parent,
  2. Grandparent,
  3. Brother/Sister
  4. Aunt/uncle
  5. Niece/nephew

The above people must have been residents of Canada at any time of the year, and must have been dependent on you for support during this time.

Documents for Retention and CRA Review

Please note that the CRA may request to see copies of the medical expenses claimed by you, especially if the claim is significantly large enough to catch their attention. Therefore, it is recommended to keep and store the medical receipts for a minimum of at least 7 years, just in case the CRA requests copies to be mailed to them for their review.

For assistance in handling CRA requests for documentation, it is always recommended for taxpayers to seek the knowledge and experience of a licensed chartered accountant.

Further information and reading material for medical expenses can be found at the link below.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/menu-eng.html