By Fin MacDonald, Fin Tax Service
Fin MacDonald has over 20 years’ experience providing retirement and Income tax planning advice. Readers are however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.
As I write this article (February 12, 2018) the 2018 BC Provincial Budget is still a week away. I will comment on both the Federal and the BC Budget in the April issue of The Beacon.
One of the goals of tax policy is to assist taxpayers in expenses that have been deemed to be in the public interest. Credits for medical expenses, disability issues and related expenses meet these goals. Here is the link to the Canada Revenue Agency’s (CRA) Medical Expenses 2017: www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4065/medical-expenses-2016.html
How to Claim Medical Expenses
Eligible medical expenses may be claimed on a calendar year basis, or by taking any day in the year and going back 365 days. The expenses may be claimed on a family basis, or by individuals. All medical expenses are subject to a 3% of net income deductible. An example: your net income is $50,000 and you have $2,500 in eligible medical expenses. The deductible (3% of $50,000) is $1,500; your Allowable Medical Expenses will be $1,000. This will reduce your tax payable by $200.60. If your spouse has a lower net income than you (but is still taxable) it may make sense to have him/her claim the medical expenses because of the lower deductible. Except for those eligible for the Refundable Medical Expense Supplement, medical expenses only reduce the amount of tax payable and do not create a refund in themselves.
Refundable Medical Expense Supplement (RMES)
The RMES provides a refund of up to $1,203 if you meet these conditions: have more than $3,514 in employment or self-employment income, have allowable medical expenses. The refund is 25% of your allowable medical expenses, but, it decreases if your family net income is more than $26,644. Very few people can meet these criteria; and those with the highest medical expenses do not usually have the employment/self-employment income needed to qualify. Since the RMES is based on family net income, even fewer people qualify.
What Expenses Are Eligible
The most common medical expenses are prescriptions and the services of a regulated medical professional. A prescription will have no tax added to it. A regulated profession is one that has a provincially legislated college. Examples: physicians, dentists, registered nurses, social workers, psychologists, naturopaths, acupuncturists and podiatrists.
Renovations such as ramps and other accommodations for people with severe mobility challenges are also eligible expenses. Travel of more than 80 km for medical treatment that is not available locally, including accommodations and a caregiver, is also eligible. Travel medical insurance and premiums for extended health and dental insurance are also eligible.
A wide range of other devices, from acoustic couplers to wigs, are eligible expenses if you have a prescription from a regulated medical professional. (A full list can be found at the link above.) New this year is “fertility related expenses”. These include doctor and hospital expenses to conceive a child. Surrogate mother fees are not eligible. Other examples of non-eligible expenses include cosmetic surgery, gym fees, condoms, alert systems such as Life Line, provincial MSP premiums and over the counter drugs and vitamins.
Attendant Care covers everything from nursing home care to home care to group home care to addictions treatment in a residential setting. For some Attendant Care expenses, a Disability Tax Credit designation is required; for others a note from a regulated medical professional will suffice. The details on whether you can claim both Attendant Care Expenses and the Disability Tax Credit are set out in a chart on page 10 in Medical expenses 2017.
The Disability Tax Credit (DTC)
Under the current Federal Government there has been an attack on, and an attempt to limit, those who might have been eligible for the DTC. Two prominent groups who have been targeted included diabetics and people with autism. Because of this on-going attack there is, at the moment, a large degree of uncertainty as to what is needed to qualify, or re-qualify for the DTC. When a person qualifies for the DTC, the CRA will indicate if it is permanent, or if it has a fixed expiry date.
To qualify for the DTC a person has to be “markedly restricted” “all or substantially all of the time” (interpreted as 90% of the time) in one of the tasks of daily living. Those tasks being: walking, dressing, feeding, seeing, hearing, speaking, eliminating (bowel and urinary functions) and mental functions necessary for everyday life.
“Markedly restricted” is taken to mean the person takes three times as long as a non-markedly restricted person to perform one of the tasks of daily living. If a person is not markedly restricted in one task, but is “significantly restricted” in two or more tasks, they may qualify for the DTC.
People receiving “Life Sustaining Therapy”, an example is dialysis, may also qualify for the DTC. The CRA has set a threshold of an average of 14 hours per week, in a minimum of three different times, to qualify for this.
Next month I will look at the changes in the Budgets and discuss some of the questions raised by participants at my James Bay New Horizons Friday Forum. As always dear readers. I look through the lens of Helping You To Keep More of YOUR Money.