As mentioned last week, I love this time of year. For the longer days. For the uplifting birdsong. For the crocuses poking through our lawns. And as a Financial Planner, also for the tax calculations and deductions.
Ah, spring!
It’s that beautiful tax season time of year, and you too can get excited about preparing and filing! I am focusing my blogs these days on easy to implement tax deductions for the DIY tax preparer.
After all, it’s fun to save money.
Last week, I discussed home office expenses in light of the COVID-19 work from home requirements. Anyone working from home in 2020 (certain restrictions apply) may qualify for a minimum tax deduction of $400, or possibly higher.
If you worked from home in 2020, I highly recommend you check-out my last blog to calculate your home office expense tax deductions.
This week, I’m looking at tax deductions connected to medical expenses. If you have been healthy in 2020, congratulations!
Please continue to eat well, exercise, and take care of yourself.
But also, keep reading.
You may find medical expenses that you didn’t know were deductible. And if you have been in more doctors’ and dentists’ offices than you care to admit, also read on. Some of your out-of-pocket expenses may be tax deductible.
As always, my blogs are for informational purposes and shouldn’t be construed as tax or investment advice. Before applying any ideas presented in any of them, I suggest you discuss your specific situation with your qualified tax advisors.
1. The fine print on medical expenses
You may claim medical expenses for:
a) Yourself,
b) Your spouse/common law partner,
c) You or your spouse’s / common law partner’s children who are under 18 years of age as of December 31 2020.
In 2020, you can claim a 15% federal non-refundable tax credit on qualifying expenses in excess of either $2,397 or 3% of your net income, whichever is less.
The CRA also allows you to deduct medical expenses for any 12-month period ending in 2020, so look for the rolling 12-month period with the highest medical expenses (e.g., March 1, 2019 to February 29, 2020).
Here’s an example directly from the CRA website that I have made a little easier to understand. These are the medical expenses for the Tulip family incurred during the 12 months ending December 31, 2020:
| Who | Net Income | Medical Expenses |
| Richard (Parent) | $48,000 | $1,500 |
| Pauline (parent) | $32,000 | $1,000 |
| Jen (16-year-old daughter) | $0 | $1,800 |
| Rob (19-year-old son) | $25,000 | $1,000 |
| Total: $5,300 |
Richard, Pauline and Jen can combine their medical expenses for a total of $4,300 and either Richard or Pauline can claim this amount.
Since Rob is over 18, his medical expenses should be claimed on line 33199.
If Pauline claims the medical expenses:
$32,000*3% = $960, which is less than $2,397, so she can claim on her tax return $3,340 ($4,300-$960).
If Richard claims the medical expenses:
$48,000 *3% = $1440, which is less than $2,397, so he can claim on his tax return $2,860 ($4,300-$1,440).
In this case, it’s better for Pauline to claim all the expenses for Richard, herself, and their daughter Jen on line 33099 of her tax return.
For Rob’s medical expenses, we must recalculate using his net income of $25,000. $25,000 *3% = $750, which is less than $2,397, so either Pauline or Richard can claim $250
($1,000-$750) and the amount goes on line 33199.
2. Eligible medical expenses
There’s a long and detailed list on CRA’s website. I will mention a few that might apply, but I suggest you review the entire list yourself.
Health plans
If you’re like me, a big portion of your health plan premiums are not covered by your employer. If this is your situation, your out-of-pocket premiums paid for medical, dental, and hospitalization plans as well as the out-of-pocket portion of medical expenses (such as prescription co-pays) are eligible.
Gluten-free products
For those with celiac disease, the incremental cost of gluten-free products for that person (not the whole family) is a medical expense. The eligible expense is the excess cost of gluten-free food over comparable products with gluten.
Travel expenses
Occasionally, the medical services that you require are not available close to your home. If you are required to travel at least 40 km one way to obtain medical services, the cost of driving or taking public transportation is eligible. Additional provisions exist if you travel in excess of 80 km.
Foreign medical services
Medical services provided outside Canada, including amounts paid to a medical practitioner at a public or private hospital, may qualify.
Private school
Costs for a school with special staff, facilities or equipment that are necessary due to a child’s physical or mental impairment may qualify.
Tutoring
A tutor’s services for someone with a learning disability or impaired mental function can be claimed if paid to someone not related to the person.
Renovations or construction costs
The costs incurred to provide someone with better mobility or functioning within their home due to a severe and prolonged impairment may qualify. For example, an altered driveway to ease access to a bus.
Fertility-related procedures
Amounts paid to a medical practitioner or a public or licensed private hospital to conceive a child may be eligible.
Medical cannabis
The amount paid for cannabis, cannabis oil, cannabis plant seed or cannabis products for medical purposes from a holder of a licence for sale and with a prescription.
Prescription drugs and medication
Drugs and medication prescribed by a medical practitioner may be eligible, but not over-the-counter medications, vitamins or supplements, even if prescribed by a medical practitioner.
I could continue, but you get the idea. The list is exhaustive and specific, so check with the CRA website before dismissing any medical-related expenses.
And don’t be intimidated—your medical expenses could become generous tax credits. Which could give you a spring in your step!
If you need assistance, please call our office and we’ll provide clarity or help you locate a qualified professional.
Never Retire Profile
As millions of Canadians eagerly line up to receive their COVID-19 vaccine, this is a good moment to recognize the work of 66-year-old Hungarian biochemist Katalin Karikó. Now a senior vice president at BioNTech, Karikó has spent her career working on RNA-based gene therapy and RNA-induced immune reactions. Truly ahead of her time as a scientist, Karikó’s research applications were rejected in the 1990s and she was even demoted as a professor. Undaunted, she teamed up with another professor, Drew Weissman, and they continued their research focus. In 2020, their technology was used by Pfizer and BioNTech to create mRNA COVID-19 vaccines, which send instructions to our body’s cells to create some of the virus’s molecules so that our immune system can then detect little pieces of the virus and defend against it. MRNA vaccines are the wave of the future in treating many diseases, and the Canadian stem cell biologist Derrick Rossi, who helped found Moderna, has called for Karikó and Weissman to receive a Nobel Prize.
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source https://richarddri.ca/2020-tax-tips-for-canadians-part-2/
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