As the dreaded tax time is upon us, let us take a quick peak at the medical tax credit. Essentially, focusing on explaining how this tax credit works, what typical expenses are covered versus expenses that are not covered, and an opportunity to provide a few good resources for further information along the way.
The medical tax credit is typically optimized between partners of a household; meaning the claim can be applied to whichever tax return will yield the highest benefit. The medical claim usually goes against the lowest income earner, though each tax situation needs to be reviewed to ensure this is the right call for their particular circumstance. The reason behind this thinking is the fact that the tax credit requires the taxpayer to spend the lesser of either 3% of your gross earnings or $2302.00. Anything above this amount would then be used to generate a claim of 15% of the amount spent, thus increasing your tax credits and reducing your tax bill or increasing your refund.
It is worth noting briefly that the medical expense itself has to be an out of pocket expense, not reimbursed by a third party, and has been paid within a 12-month period. If you have an expense such as braces placed on an installment plan, only the payments made during the 12-month period will be applicable to your tax credit calculation.
Often we are asked what medical expenses are tax deductible. The main expenses often applicable to the majority of taxpayers are the following:
• Payments made to medical practitioners
• Premiums paid into health plans
• Vision Exams
• Prescription glasses
• Nursing home fees
• Travel expenses
*Note – this list is limited, for a full-approved medical listing and details please visit:
Some of the common medical expenses not claimable for tax purposes are:
• Birth control
• Gym memberships
• Elective surgery – cosmetic in nature
• Over the counter medications/vitamins
• Massage therapy – Nova Scotian residents
• Long term disability/life insurance policy payments
* Note certain medical payments made to practitioners depend on the province the taxpayer resides in. For a full listing of which payments are covered under provincial legislation, please visit:
As you can see the tax credit itself is not a complicated calculation. The problem begins to arise when taxpayers are trying to determine which receipts to keep and which receipts to chuck during the tax year. We always have a broad spectrum from those who keep everything to those who keep nothing, and a few people fall somewhere in the middle. Luckily, many expenses such as prescriptions and dental can be claimed by simply asking the pharmacy or medical office for a year-end statement. Your statement will nicely summarize your out of pocket expenses for your income tax preparer, without the hassle of adding up receipts or risk missing a claim due to a lost receipt. Mostly importantly, they will make your tax preparer happy!
As we like to say with pretty much everything, when in doubt, keep it! We would much rather discard a receipt as not applicable then ask for a receipt that can no longer be produced!
~ Natasha ~
Stay tune for upcoming discussion on what exactly is medical travel expenses and which records you need to provide to substantiate your claim!