When tax time comes, the last thing you want to do is miss out on beneficial refunds and credits, either for yourself or your business. When it comes to missed tax savings, medical expenses top the list. A long list of medical expenses are tax-deductible in Canada—depending on how much you paid for your medical expenses, you may be eligible for a refundable tax credit that can make a significant difference in your annual tax bill.
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What Is Canada’s Medical Expense Tax Credit?
The Medical Expense Tax Credit, or METC, is an Income Tax Act credit applied to your tax return. It is non-refundable but may be subtracted from the taxes you owe.
The size of your METC will depend on your eligible expenses, your net income for the tax year, and the province in which you live. You may be able to claim a METC if your medical expenses exceeded $2,397 or 3% of your net income, whichever is less.
What Is an Eligible Medical Expense?
The list of tax-deductible medical expenses is long, and additional expenses may be eligible beyond what is listed by the Canadian Revenue Agency (CRA).
An eligible medical expense must be medically necessary for the health and well-being of you or a member of your taxable household. It also can’t have been previously reimbursed by a separate healthcare plan, such as a group healthcare plan or independent medical insurance.
Common Medical Expenses
Many common medical expenses are eligible for the METC, even if your health insurance does not cover them. Some expenses may require evidence of a prescription from your doctor. Examples of common medical expenses claimed include:
- Hospital service, private and public
- Doctor or physician expenses (though this varies by province)
- Prescriptions and medications (not over-the-counter)
- Pre-natal treatments, post-birth care, and in-vitro fertility treatments
- Lab fees
- Insurance premiums for medical care coverage
Whether for medical or dental plans, health care plan premiums are eligible for the METC, as are out-of-pocket medical expenses and co-pays.
If you or a loved one has diabetes, medications such as insulin, as well as the needles, syringes, and infusion pumps used to treat the condition, are all eligible for the METC. Other medical aids, including wheelchairs, crutches, and braces, are also eligible.
The blind and hearing-impaired can also benefit from this tax credit. Contact lenses, eyeglasses, hearing aids, and batteries, as well as guide dogs for the blind or deaf, are all eligible.
Receipts are, of course, required to claim these medical costs and must be included with your tax return when you file it. If you file electronically, retain the receipts and keep them in case the CRA requests them.
Other Valid Medical Expenses
Some other medical expenses may be less obvious, but if they improve the life of someone in your household, they may qualify as a valid medical expense. Some may also require a doctor’s prescription. Check with the CRA to verify if you can include your medical expenses.
Some unusual medical expenses include:
- Cosmetic and plastic surgery that is either reconstructive or medical, such as artificial teeth or nose reconstructive surgery
- Birth control pill (requires a prescription by a doctor)
- Drug addiction treatment
- Air conditioners or furnaces that are required to improve the life of an individual with chronic lung problems (prescription required)
- Long-term care insurance and expenses, including nursing home care
- Oxygen supplies and equipment
- Organ transplant
If you or a loved one requires cancer treatment outside of Canada, the METC applies for the treatment as well as the travel expenses for treatment. You can also claim moving expenses if your condition or treatment requires you to move to a new home to access care or address accessibility issues.
Costs for special schooling and private tutoring due to a physical or mental impairment may also qualify for the METC. Tutoring services may only be claimed if provided by an individual or individuals not related to the person in need. A doctor will need to prescribe the schooling or tutoring to certify the need and secure eligibility.
This Piece Offers Some Great Insight to Whether or Not Health Insurance is a Taxable Benefit.
Medical Expenses Not Eligible for the METC
While most medical expenses are eligible for the medical expense tax credit, there are a few that aren’t, including:
- Parking or travel expenses to go to an appointment or treatment that is less than 40 kilometres from your residence
- Over-the-counter medications
- Supplements and vitamins
An exception to the supplements and vitamins prohibition is B12 shots if a doctor prescribes them for pernicious anemia. Certain types of cosmetic surgery to correct injuries, disfiguration from disease, or congenital abnormality qualify as well, but cosmetic surgery for purely cosmetic purposes is not eligible.
Who Can I Claim Medical Expenses For?
Claiming medical expenses on your tax return is limited to expenses you or your spouse or common-law partner paid for during a 12-month period corresponding to the tax year you are filing. You can only claim expenses in one tax year.
To claim medical expenses for yourself, your spouse or common-law partner, or your dependent children born between 2003 and the current tax filing year, you’ll need to use line 33099 in your personalized tax form.
Medical expenses can add up to a considerable part of your annual expenses. With the Income Tax Act, and specifically the Medical Expenses Tax Credit, it is easy to claim your medical expenses on your annual tax returns and receive reimbursement.
Learn More About Medical Expenses and Your Taxes
As a small business owner, there’s another way you can save on your medical expenses beyond claiming the Medical Expense Tax Credit—a Health Care Spending Account (HCSA). With an HCSA, you can turn 100% of your after-tax medical expenses into before-tax business deductions.
If you have employees, adding an HCSA option to your benefits plan will also lead to a larger deduction as costs associated with that are also tax-deductible. As a bonus, offering a more comprehensive benefits package will help you attract top talent.
It also improves employee satisfaction, which can improve productivity and loyalty, in turn decreasing the chances you’ll lose staff. Lower turnover rates are yet another way to keep your overhead costs low!
In short, whether you are an independent contractor, self-employed, or plan to offer group benefits to your employees, an HCSA can help you save more on your taxes by reducing your taxable income. At Group Enroll, we work with the top insurance companies in Canada to find the lowest quotes possible for Health Care Spending Accounts and other group benefits.
If you’d like to explore your options, fill out our quick quote form, and we’ll do the rest! You can also email us at [email protected] for more information about tax-deductible medical expenses. We’re always happy to answer questions.