Canada’s Medical Expense Tax Credit (METC)

Canada’s Medical Expense Tax Credit (METC)

The Medical Expense Tax Credit (METC) is a non-refundable tax credit that allows you to claim back a portion of your medical bills and health insurance costs as a tax credit. It’s important to note that because it’s a non-refundable tax credit, you can only use the METC to reduce the tax you already owe. You can’t use it to bring your tax balance above zero for a refund.

Let’s take a closer look at how the METC works, who can claim it, and whether there are any alternatives out there.

Table of Contents

How the Medical Expense Tax Credit Works

Your medical expenses must exceed a certain threshold to qualify for the METC. At the moment, that threshold is either 3% of your net income, or $2,397, whichever is lower.

The amount of the tax credit is determined by multiplying your medical expenses in excess of the threshold by the lowest marginal tax rate of your province in addition to the federal tax rate of 15%. Since these provincial tax rates vary, it’s important to know the lowest marginal tax rate in your province if you prepare your own taxes.

One aspect that can make claiming the METC challenging is a lack of supporting documentation. Many people don’t keep mileage logs or prescriptions, which can influence the end result of their claim. We highly recommend keeping all your medical documentation, as well as supporting documentation like fuel receipts and caregiver lodging receipts, to get the most out of your claim.

Claim Period

The Canada Revenue Agency (CRA) allows you to use medical expenses from any 12-month period, as long as it ends within a tax year. This period allows you to maximize your credit by claiming medical expenses that you couldn’t in the previous year. Just double-check the last expense still falls in the tax year.

Note that you can’t double-dip and claim a medical expense for this tax year if you have claimed it in another year, even if it falls within the selected 12-month period. Your entire family also must use the same start and end date for the claim period.

The 12-month rule allows you to maximize the impact of your tax credit. For instance, let’s say that your family had a spate of medical expenses from November to February. If you choose a tax period that ends on December 31, you’ll split the expenses across two different tax years. The disadvantage of this is that you’ll be subject to the 3% rule twice, which can dramatically reduce your claim credit.

Instead, if you select a 12-month claim period from October 1 to September 31, you can lump all your November – February expenses in one claim. You’ll only have to pass the 3% threshold once, maximizing the credit you receive.

Allowable Deductions

The CRA has an exhaustive list of allowable deductions that qualify for the METC. Some of the more notable deductions include:

  • Prescribed medication
  • Dental treatments
  • Health insurance premiums
  • Air conditioners and air filters, as long as prescribed by a medical professional
  • Crutches and other prosthetics
  • Medical marijuana
  • Service animals
  • Baby-breathing monitors
  • Bathroom aids
  • Environmental control systems
  • Full-time care facilities, or the salaries or wages of the in-home care attendant
  • Hearing and vision assistance
  • Mobility aids
  • Up to 20% of the cost of a van to transport wheelchair users
  • Travel expenses if you receive medical care over 80 km away from your home. These expenses include parking charges and other vehicle expenses such as fuel and accommodation.

 

According to the CRA, all eligible medical expenses are allowable, even those incurred outside Canadian borders.

Healthcare Insurance Premiums

Overlooked Eligible Medical Expenses

The METC vs the Disability Tax Credit

The Disability Tax Credit applies to individuals with prolonged medical conditions. It covers:

  • Medical expenses for prolonged medical conditions
  • The cost of attendant care over $10,000
  • The cost of a nursing home

 

In some instances, you may achieve a lower tax liability if you claim the METC instead of the DTC. It’s worthwhile to speak to a tax consultant to identify the best option for your particular situation.

Ineligible Deductions

While there are plenty of medical procedures that fall under the METC, there is also a relatively long list of ineligible deductions. Some of the more notable exceptions include:

  • Cosmetic surgery, unless it’s for reconstructive surgery from a congenital disability, accident, or disease
  • Fitness clubs
  • Health plan premiums
  • Over-the-counter medications, even if you have a prescription
  • Diaper services
  • Personal response systems

RELATED ARTICLE

Who Can Claim the Medical Expense Tax Credit?

There are two main categories of medical expense claims outside of claims for yourself: those for close family and those for other dependents. While the claim process is almost the same, you will use a different line on your return for each.

Close Family Members

Other Dependents

Medical Expenses for a Deceased Person

Supporting Documentation

In most cases, you won’t need to submit supporting documentation along with your tax return form. However, it’s a good idea to keep these documents in the event of an audit or review. Examples of supporting documents include:

  • Receipts showing CRA-deductible expenses that indicate the name of the company or individual you paid
  • Prescriptions from an accredited and registered medical practitioner
  • Certification for certain items in the CRA guide, such as air conditioners or aids. Your primary healthcare provider or any other authorized medical practitioner can issue this certification
  • A mileage log for travel expenses
  • Social insurance numbers for individual paid caregivers

Applying for the Medical Expense Tax Credit

You’ll apply for the medical tax credit on your Schedule 1 tax return. You can either complete line 330 if you’re claiming for yourself or close family members or line 331 to claim for other dependents. You should also complete your territorial and provincial form with the same information.

You can submit your return electronically or via post. If you submit your return electronically, keep all the supporting documentation in case the CRA needs to review something.

If you submit your return by standard mail, attach all supporting documents and keep a copy of them for your records.

Alternatives to the Medical Expense Tax Credit

If you’re an independent contractor, self-employed, or a small business owner, you can use a CRA-approved Health Care Spending Account (HCSA) instead of applying for medical expenses tax credits. A Health Care Spending Account, also sometimes called just a Health Spending Account, is a designated account that reimburses you for any out-of-pocket medical expenses.

The advantage of using an HCSA is that the reimbursement is tax-free. Similarly, the HSA is 100% tax-deductible for your company. There are several other advantages to this method, as well:

  • No minimum threshold
  • No wait to get credits
  • No complicated calculations
  • 100% reimbursement

 

However, you can’t take advantage of both the METC and an HCSA for the same expense. You also need to have an incorporated business or have at least one employee to take full advantage of the tax benefits of an HCSA. A qualified tax professional can help you determine if you qualify for an HCSA, and if not, what you can do to change that.

Find the Right HCSA with Help from Group Enroll

If you do decide to go with an HCSA, we can help you find the right plan for you at the right price. We work with the top group insurance providers in Canada to deliver the lowest quotes possible.

The process is simple, just email us at hello@groupenroll.ca or fill out our quick quote form to get started, and we’ll do the rest. We can also be contacted by mail at 10 Great Gulf Drive, Unit 5, Vaughan, ON, L4K 5W1.