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Normandin Beaudry

Non-refundable tax credits for medical expenses

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There, in black and white

Bulletin NB Vol. 9 N. 1, March 2006

For the second consecutive year, Normandin Beaudry is issuing a bulletin about non-refundable tax credits for medical expenses that can be claimed on income tax returns. This is a follow-up to our March 2005 bulletin (Vol. 8, No. 4).

Firstly, in order to be considered eligible by either level of government, the medical expenses must have been paid during a period of 12 consecutive months ending in 2005. Therefore, it is possible to consider claims paid in 2004, with the condition that the time between the payment date of the first expenses claimed and the payment date of the last expenses claimed does not exceed 12 months. Obviously, all of the expenses to be considered for a credit must not have be used in the 2004 income tax return and must have been paid on or before December 31, 2005.

FEDERAL TAX RETURN AND PROVINCIAL TAX RETURN - PROVINCES OTHER THAN QUEBEC

  • Some changes have been made to the list of eligible medical expenses since the 2004 taxation year. Among other things:
    • Expenses incurred to purchase marijuana or marijuana seeds for medical purposes are now eligible under certain conditions;
    • Some expenses related to deafness, blindness and speech disorders, among other things, are now eligible under certain conditions.

Taxpayer, spouse and dependant children under 18 years of age

(line 330 of the federal tax return, line 5868 of the provincial tax return)

  • To be entitled to a tax credit, the total eligible medical expenses must exceed the lesser of the following amounts:

    Federal:
    • 3% of net income (line 236); and
    • $1,844 ($1,813 in 2004).
    Provincial:
    • 3% of net income (line 236 of the federal tax return); and
    • A fixed amount that varies between $1,614 and $1,889 depending on the province or territory of residence (difference of $35 or less from 2004).
  • Since net income is determined individually for each spouse both federally and provincially, it may be advantageous to claim all of the eligible medical expenses on the return of the spouse with the lower net income.

Other dependants

(line 331 of the federal tax return, line 5872 of the provincial tax return)

  • You can also claim a tax credit for medical expenses paid by yourself or your spouse for the following individuals, regardless of whether they are your or your spouse’s dependants:
    • Your or your spouse’s children over 18 years of age and grandchildren;
    • Your or your spouse’s parents, grandparents, brothers, sisters, uncles, aunts, nephews and nieces who resided in Canada at any time during the year.
  • Unlike the calculation in the previous section, you must do a separate calculation for each of these other dependants, only taking into account the particular dependant’s net income. An example outlining the methodology of this calculation is provided on page 42 of the federal General Income Tax and Benefit Guide.
  • The maximum credit for each dependant is now $10,000 for each level of government ($5,000 in 2004).

PROVINCIAL TAX RETURN - QUEBEC

(line 381)

  • You only have to do one tax credit calculation for all eligible dependants, as described above for lines 330 and 331 of the federal tax return.
  • Some changes have been made to the list of eligible medical expenses since the 2004 taxation year. However, these changes only apply to expenses incurred after April 21, 2005. Among other things:
    • Expenses for medical or dental services provided for purely cosmetic purposes are no longer considered eligible expenses;
    • Expenses for eyeglass frames are now limited to $200 per person.
  • To be entitled to a tax credit, the total eligible medical expenses must exceed 3% of family income. Family income is defined as the sum of the amounts on line 275 of the taxpayer’s and spouse’s tax returns. Thus, unlike the federal tax return, there is no tax benefit in claiming all of the medical expenses on the return of the spouse with the lower income.

Note that the information in this bulletin does not constitute an official opinion for tax purposes. For more information regarding tax returns, please consult a tax professional or visit the following government Web sites:

Canada Revenue Agency: www.cra-arc.gc.ca
Ministère du Revenu du Québec: www.revenu.gouv.qc.ca

 

Please feel free to contact us for additional information.

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