Canadian Tax Credits for Medical Expenses

[Saanich]

Surgery can be expensive, and some guys out there might put it off since they are worried they can’t afford it.

There is a non-refundable tax credit for medical expenses, as well as a supplement for lower income people. If you save all of your receipts and claim them when you file your tax return, you could end up getting back 20 to 50% of the cost of your surgery (or have this amount deducted from the taxes you owe!). The exact amount will depend on your province of residence and your income level.

I’ve tried to simplify everything and I hope it’s not too hard for you guys to follow. Remember that this is just a guide and the exact numbers and percentages are subject to change year by year. Please run your own numbers by your accountant/tax preparer or through a personal tax software programme. You can also take a look directly at the Canada Revenue Agency’s website:
 http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/330/menu-e.html

NON-REFUNDABLE TAX CREDIT

1) Add up all of your family’s medical expenses for the year. In addition to fees for consultation, surgery, travel expenses, prescriptions, remember to include the amounts you paid for dental expenses, chiropractor, eyeglasses, insurance premiums...

2) Determine your net income after deductions.

3) Take the lesser of 3% of your net income or $1844..

4)Any medical expenses above this amount are eligible for a non-refundable tax credit.

5) This non-refundable tax credit can be used to reduce federal and provincial taxes to zero. Generally if your net income is over $8839, you can benefit from this tax credit. If you are married, it is usually beneficial for the lower income spouse to claim the medical expenses for the entire family. The amount you get back varies by province/territory ranging from 19.25% in Nunavut to 26.25% in Saskatchewan.

Example 1.
Single person in Ontario, net income $15,000, medical expenses ($150 dental + $1800 surgery)

3% of net income is $450.
Medical expenses are $1950. Subtract the $450 deductible and $1500 are eligible for the tax credit.
The Ontario (and BC) rate is 21.30%, so the tax credit is worth $319.50.
[Therefore the net cost of surgery for this guy is $1480.50. But see below, he is entitled to more...]

Example 2.
Married person in Nova Scotia, net income $75,000 (spouse’s income $40,000), family medical expenses ($1200 dental, insurance etc + $5000 for surgery)

3% of income=$2250, but $1844 amount is lower.
However spouse has lower income, so 3% of $40,000 = $1200
Family medical expenses are $6200. After subtracting the $1200 deductible–$5000 are eligible for the tax credit.
The Nova Scotia rate is 24.04%, so the tax credit is worth $1202.
[Therefore net cost of surgery for this guy is $3798.00]

REFUNDABLE MEDICAL EXPENSE SUPPLEMENT

In addition, there is a refundable medical expense supplement for lower income people such as students:.

1) To claim this credit, you must have at least $2857 in income from employment or self-employment.

2) If your net income is over $22,140 the supplement starts to be phased out.

3) If you qualify, you will receive 25% of your family’s eligible medical expenses (as calculated in # 4 above) to a maximum of $1000.

Example 1 (same as above)
He has $1500 in eligible medical expenses.
25% of that is a $375 refundable supplement.

His surgery cost $1800. He is entitled to a non-refundable tax credit of $319.50 and a refundable supplement of $375, so when he files his taxes he will get $694.50 back, meaning the net cost of his surgery is only $1105.50.

Example 2 (same as above)
This person is not eligible for the supplement as his income is $75,000 and that of his spouse is $40,000.

[marx]

Great advice Saanich!  Keep those receipts guys!

[Dadadaboom]

Are you sure the tax credit applies to plastic surgery? Would it only apply to gyne surgery, or could it be used with anything (e.g. abdominal liposuction)?

Also, do you know if there's some discreet way to get a receipt? I don't want my accountant (or ANYONE for that matter) knowing I had this surgery.

[Saanich]

Yes, any plastic surgery fees are applicable as medical expenses. So too are a lot of other things: check here:
http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/330/allowable-e.html

I will have to check, but I believe my receipt from Fielding just says "surgery fee" on it, and has his stamped signature.

I can't speak for your accountant, but I have completed many tax returns for people over the years. To be honest, I don't even look for anything beyond 1) patient's name and if it looks like a valid receipt, 2) Dr's name, 3) date and 4) amount payed. And then I double check those four things and move on to the next receipt.

Even if your receipt did say "gynecomastia surgery", your accountant would probably be too busy during tax season to google it, let alone care, but it's a valid concern for a lot of us on this board.

hope this helps

[Dadadaboom]

Thanks for the info. This is great advice that will probably save me about $3000 - all because you were considerate enough to post your message. Thank you, sincerely.

[marx]

Just put doctor's name, and "surgery" in the description.  Your accountant does not need to know unless the receipt is more detailed.  Or just tell your accountant that you'll clip the receipts when finished and mail the return in yourself instead of e-filing.

[firstalpha]

Saanich is right, I just checked it from plasticsurgeryinfo.ca. You guys can check it out here: http://www.plasticsurgeryinfo.ca/sponsors/cosmetic_surgery_loan.html. By the way Saanisch what about the people whose income is really low, let say I worked only for three months this year and my gross income for this year is $7000 (tax not paid) and before that I was in unemployment benefit for few months let say 6 months of $980/month. Am I eligible for this tax credit and if so, how do you calculate the amount with all my gross income and the employment insurance benefit. By the way I'm a single man. 

[Saanich]

Firstalpha,

based on what you told me, you should qualify for both credits and get nearly 40% back.

Your income is about $13,000.
3% of this is $390. So any medical expenses above this are eligible.

Everyone starts off with a basic personal amount of $8839. This means you do not pay tax on your first $8839 of income.

You pay tax on income above this. Let's assume at 23% (exact amount will depend on your province of residence). So ($13,000 - $8,839) x .23 = $957 in tax owing.

1) Say you have $1500 in expenses over your $390 amount. Your non-refundable credit is worth $345, and your supplement is worth $375, so instead of owing $957 in tax, you only owe $237.

2) Say you have $3000 in expenses over your $390 amount. Your non-refundable credit is worth $690, and your supplement is worth $750, so instead of owing $957 in tax, you get a refund of $483.

3) Say you have $4500 in expenses over your $390 amount. Your non-refundable credit is worth $1035, and your supplement is worth $1000 (the maximum allowed), so instead of owing $957 in tax, you get a refund of $1078.

Based on the limited information you have given me, you have the near perfect income to maximally benefit from your eligible medical expenses. You should get close to 40% back.