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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. 12 N. 4, March 2009

Several expenses related to medical care can reduce or eliminate the income tax owing by Canadian taxpayers(1). Subject to certain eligibility criteria, a tax credit of between 4% and 20% of the incurred expenses can be granted. It is important to note that unlike some other tax credits, credits for medical expenses are non-refundable. Therefore, credits in excess of the amount of income tax to be paid are not reimbursed.

Eligible expenses

Below are a few examples of eligible medical expenses (maximums may apply). Please note that tax credits cannot be claimed for the portion of eligible medical expenses that is reimbursed through an insurance plan.

  • Deductible, co-insurance or other medical expenses not reimbursed by insurance plans;
     
  • Payments made to a medical doctor, dentist, nurse or certain other medical professionals;
     
  • Payments made to a public or licensed private hospital;
     
  • Premiums paid by the taxpayer to a private health services plan for health and dental care insurance coverage. Quebec residents can also include premiums paid by the employer (box J of the RL-1 slip or box B of the RL-22 slip);
     
  • Payments for eyeglasses, contact lenses or other devices prescribed by a physician or optometrist for the treatment or correction of a visual disorder;
     
  • Amounts paid to purchase drugs prescribed by a physician or to obtain an artificial limb, a wheelchair, crutches or a hearing aid.

For a complete list of eligible expenses, consult Interpretation Bulletin IT-519R2 "Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction" issued by the Canada Revenue Agency. For residents of Quebec, consult the brochure "Medical Expenses (IN-130)" issued by the provincial government. These documents are available on the websites mentionned at the end of this bulletin.

Eligibility criteria

Taxpayers can claim tax credits for eligible medical expenses for themselves and their dependents, i.e. individuals that they supported and that lived with them or were dependent on them because of an infirmity. A dependent can be the child, the parent, the spouse or almost any other individual related to the taxpayer.

To qualify as eligible expenses, the medical expenses must have been paid during a period of 12 consecutive months ending in 2008. Therefore medical expenses paid in 2007 can qualify as long as 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. Any expenses submitted for a tax credit must not have been used in calculating the 2007 tax return and must have been paid on or before December 31, 2008.

To qualify for a tax credit, the total eligible medical expenses must typically exceed the lesser of the following amounts:

  • 3% of the taxpayer's net income for the tax year (A); or
     
  • An amount that varies according to the government authority and province of residence (B).

We invite you to read the next section to learn about aspects specific to each province, especially in regards to the Quebec tax return for which calculations vary more significantly.

Also, please note that a maximum credit, which also varies according to the government authority and province of residence, normally applies for each dependent.

Aspects specific to the province

As mentioned above, some aspects pertaining to eligible expenses and the tax credit calculation are specific to the taxpayer's province of residence. Thus, it is important to always consult the appropriate income tax guide.

For example, the threshold to qualify for a tax credit in 2008 (see B, previous section) varies between $1,637 and $2,088 provincially and of $1,962 federally. The maximum credit granted for each dependent varies between $5,000 and $11,053 provincially and is $10,000 federally.

Tax credit calculation in Quebec

Unlike elsewhere in Canada, a single tax credit calculation applies to the taxpayer and all eligible dependents in Quebec.

Moreover, there is no maximum credit for each dependent and, to qualify for a tax credit, the total eligible medical expenses must exceed 3% of the family income. Thus, in Quebec, there is no tax benefit in claiming all of the medical expenses on the tax return of the spouse with the lower income.

Note to employers
Distributing this bulletin to your employees is a very good way of keeping them informed of the latest news related to their group insurance plan. Combined with other information provided periodically, this communication will keep your employees interested to their plan.

The information presented 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 Canada Revenue Agency website at cra-arc.gc.ca or the Ministère du Revenu du Québec website at www.revenu.gouv.qc.ca

(1) Lines 330 and 331 of the federal tax return, line 381 of the provincial tax return for residents of Quebec and lines 5868 and 5872 of the provincial tax returns for residents of other provinces.

 

Please feel free to contact us for additional information.

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