AdobeStock_77939924_WM.jpeg

Koroll & Company Blog

How to Maximize Your Medical Expense Tax Credit in Ontario

[fa icon="calendar"] Dec 17, 2019 12:52:36 PM / by Allen Koroll

Accountant using calculator

As a Canadian, you benefit from publicly funded health care. There are, however, a number of medical expenses not covered by this system.

For some of you, these costs may be completely covered by an employment benefits plan but, for many taxpayers, expenses such as dental care, prescription drugs, psychologists, registered massage therapists and physiotherapy are paid partially, if not fully, out of pocket.

To help offset these expenses, there is a tax credit, which can help optimize your tax planning strategy.

Unfortunately, there is no general rule that can be followed for determining the eligibility of a medical expense. To find out whether an expense is eligible, head to the Canada Revenue Agency (CRA) website.

Once you have determined which of your medical expenses qualify, it is time to determine your tax credit. The rule of thumb, for claiming eligible medical expenses, is that any amount over the lesser of 3% of your income OR $2,352 (in 2019) can be claimed for the medical expense tax credit.

Put simply, if your net income is less than $78,400 in 2019, you can claim all eligible expenses over 3% of your income (i.e. if you make $45,000, you can claim any amount over $1,350). If you make more than $78,400 you can claim any expenses over $2,352.

Combining medical expenses

It is important to note that all eligible medical expenses incurred by the taxpayer, their spouse, their dependent children and other dependent relatives can be added together and claimed by one family member to further optimize the amount claimable.

In most situations, the claim can be further optimized by having the lower-income spouse claim the expenses, as they will have a smaller threshold.

Optimizing your medical expense tax credit

The medical expense tax credit is unique in that you can choose to claim expenses from the previous year, so long as they were not claimed on that year’s income tax return. More specifically, you can choose any 12-month period ending anytime in 2019 to claim your medical expenses.

This can be beneficial if you had a costly medical expense in 2018 that did not push you over your threshold during your previous year's return, as well as costly medical expenses in 2019.

Example:

In 2018 you made $50,000. Your medical expense threshold was $1,500 ($50,000 *3%). In November of 2018, you had eligible dental work completed for $1,300. It was your only medical expense for 2018. Because it was not over your threshold, you did not claim it.

In 2019, you made $60,000 which makes your medical expense threshold $1,800 ($60,000 x 3%). In October of 2019, you had more eligible dental work completed for $1,700. Even though the $1,700 expense does not put you over your 2019 threshold, because you did not claim the $1,300 from 2018 you can include it on your 2019 tax return.

In this case, you would choose a 12-month period starting November 2018 and ending 12 months later in 2019, so that you could receive a tax credit on $1,200.

Expenses eligible for the medical expense tax Credit = ($1,300 + $1,700) - $1,800 = $1,200.

Unfortunately, there is no quick and easy way for determining which 12-month period to use as it depends on your specific situation.

For more information on claiming medical expenses and for help determining which 12-month period would best optimize your return, contact Koroll & Company today!


Book A Free Consultation


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.



About Koroll & Company

At Koroll & Company we grow our firm through satisfied clients referring us as a trusted accounting firm to their friends, family members and associates. The only way we know how to achieve this is strive to exceed your expectations and provide you with exceptional service. We have 20+ years servicing Newmarket, ON and the surrounding areas, and look forward to servicing you next. So give us a call and speak to a friendly staff member from Koroll & Company today!

Topics: Tax Deductions

Allen Koroll

Written by Allen Koroll