2020 tax year – Tax credit for medical expenses and special rule for office supplies and computer equipment

Exceptionally for the 2020 tax year, the Canada Revenue Agency (CRA) and Revenue Québec have indicated that if an employer provides an allowance or a refund for the purchase of office supplies and computer equipment, this amount will not be considered to be part of the employee’s taxable income, up to a maximum of $500 per employee, if the equipment is used for telework.

It is worth noting that certain employers offer Wellness Accounts that refund certain expenses for office supplies and computer equipment. These employers may want to verify with their Wellness Account administrator if expenses for office supplies and computer equipment can be declared separately since expenses reimbursed through a Wellness Account are usually considered to be part of the employee’s taxable income.

For the 2020 tax year, Canadian taxpayers could be entitled to a tax credit ranging from 4% to 20% for medical expenses¹ incurred for themselves or their dependants. The credit is subject to certain conditions and depends on the province or territory of residence.

Compared to 2019, the only modification to the tax credit calculation is the minimum threshold to qualify for a tax credit at the federal level and in certain provinces and territories. Tax credit rates remain unchanged.

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 expenses reimbursed through an insurance plan.

• Deductibles, co-pays or other medical expenses not reimbursed by insurance plans
• Payments made to a physician, dentist, nurse or certain other medical professionals
• Payments made to a public hospital 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 on their provincial income tax return (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, wheelchair, crutches or hearing aid

For a complete list of eligible expenses, refer to Canada Revenue Agency document RC4065 Medical Expenses – 2020. Quebec residents can consult Revenue Québec publication IN-130-V (Medical Expenses).

Taxpayers can claim tax credits for eligible medical expenses for themselves, their spouse and their dependent children under 18 years of age. If applicable, taxpayers may also include medical expenses for their other dependants such as individuals that they supported and who lived with them or depended on them due to a disability. Such a dependant can be a child aged 18 years or older, a parent, or almost any other individual related to the taxpayer.

To be eligible, the medical expenses must have been paid during a period of 12 consecutive months ending in 2020. Therefore, medical expenses paid in 2019 can qualify as long as the time between the payment of the initial expenses claimed and the payment date of the last expenses claimed does not exceed 12 months. Expenses submitted for a tax credit must not have been used in the 2019 tax return and must have been paid no later than December 31, 2020.

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

(A) 3% of the taxpayer’s net income for the tax year

or

(B) an amount that varies depending on the government authority and the province or territory of residence

It is important to note that credits that exceed the amount of income tax to be paid are not reimbursed (non-refundable credits).

Please read the next section to learn about features specific to each province and territory, especially Quebec.

At the federal level and in the rest of Canada, excluding the province of Quebec, taxpayers must declare their medical expenses, including those for their spouse and dependent children under 18 years of age, and medical expenses for other eligible dependants separately. The total eligible medical expenses for other dependants must therefore exceed the lesser of the aforementioned amounts (A or B); amount A therefore corresponds to 3% of each dependant’s net income.

Other aspects pertaining to eligible expenses and tax credit calculation are specific to the taxpayer’s province or territory of residence. Therefore, it is important to always consult the appropriate income tax guide.

For example, the threshold to qualify for a tax credit in 2020 (see (B) in the previous section) is $2,397 at the federal level and varies between $1,637 and $2,503 in the provinces and territories. Although expenses incurred by dependants other than the spouse and dependent children under 18 years of age are no longer subject to a maximum at the federal level and in most provinces and territories, a maximum still applies in Ontario ($13,156) and the Northwest Territories ($5,000).

Moreover, medical expenses used to calculate the amount claimed on a taxpayer’s tax return cannot be used on the spouse’s tax return. Please note that it may be advantageous to claim all medical expenses on the tax return of the spouse with the lower income.

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

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 to claiming all medical expenses on the tax return of the spouse with the lower income. There is no maximum credit for each dependant. Moreover, medical expenses used to calculate the amount claimed on a taxpayer’s tax return cannot be used on the spouse’s tax return.

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¹ Lines 33099 and 33199 of the federal tax return, 381 of the Quebec tax return and 58689 and 58729 of the tax form for other provinces and territories.

The information presented in this bulletin does not constitute an official opinion for tax purposes. For more information on tax returns, please consult a tax professional or visit the Canada Revenue Agency and the Ministère du Revenu du Québec websites. If you would like more information, contact your Normandin Beaudry consultant or email us.