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Normandin Beaudry

Non-refundable tax credits for medical expenses

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There, in black and white

NB Bulletin Vol. 10 N. 1, Febuary 2007

This year again, Normandin Beaudry is issuing a bulletin about non-refundable tax credits for medical expenses that can be claimed on income tax returns. This document is a complement to our March 2005 bulletin (Vol. 8, No. 4). As done last year, this bulletin presents the annual updates applicable to the parameters used to determine the tax credits level. It also highlights the major changes that will impact tax credits calculation.

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 2006. Therefore, it is possible to consider claims paid in 2005, 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 2005 income tax return and must have been paid on or before December 31, 2006.

It is also important to note that no change has been made to the provincial and federal lists of eligible medical expenses in comparison to the ones used to produce the 2005 tax returns.

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

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
  • $1,884 ($1,844 in 2005).

Provincial: 

  • 3% of net income (line 236 of the federal tax return); and
  • A fixed amount that varies between $1,614 and $1,925 according to the province or territory of residence (difference of $40 or less from 2005 depending on the province or territory).

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 tax 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 43 of the federal General Income Tax and Benefit Guide.
  • It is important to note that the maximum credit for each dependant is $10,000 at the federal level and varies at the provincial level according to the province. Thus, the maximum credit is $5,000 for New Brunswick, Nunavut and Northwest Territories while it is $10,190 for Alberta and $10,220 for Ontario. The maximum credit is $10,000 for all other provinces.

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.
  • 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 tax 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.

514.285.1122
 
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6