Banka: Clarifying the medical expense tax deduction changes

People think that they can deduct 100 per cent of the medical expenses, when in fact, only 15 per cent is deductible.

I write a column about medical expenses every tax season because it’s the tax credit that is the most time consuming to figure out and can provide the least benefit.

It is also the area of the tax act that is the most detailed and usually has the most changes.

In 2014, service animals used to help manage severe diabetes and designing of personal therapy plans are deductible expenses.

Most people know that in order to claim a medical item, the payment must have been made to a medical practitioner, a dentist or a registered nurse or be for prescription medication.

They also know that the receipts must be for the current period.

Where people seem to get tripped up is when they think that they can deduct 100 per cent of the medical expenses, when in fact, only 15 per cent of the amount over three per cent of your net income can be deducted on your income tax return.

Medical expenses can be taken by one spouse for both spouses and also for your dependents even though they may no longer live with you, limited by the same criteria as above, but against their net income.

The proof that the Canada Revenue Agency   requires when taking the medical expense credit for a dependent is that you paid the expense.

The medical expense credit is a non-refundable tax credit. What that means is that a credit is given to the taxpayer that will be deducted directly off their taxes payable based on certain criteria.

It is not refunded to the taxpayer. If the taxpayer doesn’t have enough taxes owing to take the entire medical credit, the rest of the credit is lost.

You can find a list of eligible medical expenses on the CRA website.

The list is not exhaustive, but if you call CRA and ask whether or not an item is deductible, you will be directed to check that list.

As for what do you need to bring your accountant for a medical expense claim, we require a medical receipt along with proof of payment.  The debit card slips by themselves are not accepted by CRA and will not qualify for the credit.

Most pharmacies are all computerized and will gladly print you out an annual summary that you can bring to your accountant.

Then you can be assured that you have all your medical expenses and it might speed up the processing of your return.  Some pharmacies and dental offices will provide a total page showing just the total of the medical paid for the year, however this is not sufficient.  What you need to provide to your accountant is the detailed list of medical expense procedures performed so that they can verify that there are no non-deductible items included.