Applying through your tax return, the Medical Expense Tax Credit (METC) is non-refundable. You can deduct it from the amount of taxes you owe, but it cannot increase your tax balance above zero because it is non-refundable. You can apply for this tax credit if you incur medical costs that are allowed under the Income Tax Act.
In this guide learn how you can maximize your returns, stay informed:
How does the Credit for Medical Expenses Operate?
It is important to meet the Income Tax Act requirements and incur medical expenses. You may be eligible for a tax credit on the percentage of those expenses that exceed $2,421 or 3% of your net Income, whichever is lower.
Next, multiply the amount that surpasses the barrier by the lowest marginal tax rate in your jurisdiction (10% in Alberta’s case) plus the federal rate (15%). Your METC number is this one.
Formula:
To make the formula easier to read, a letter will be allocated to each variable:
- Net Income ($), in this case, is A
- Allowed Medical Costs ($) = B
- Province with the lowest marginal tax rate (%) = C
Step-wise Method:
- Let A * 0.03 = A1.
- Examine A1 against $2,421
- Select the lower value, which we’ll refer to as A2.
- B – A2 = X
- METC = X * (C + 0.15),
Note: 15% is the lowest federal marginal tax rate, and 0.15 represents that
Which Medical Costs are Exempt from Taxes?
Many different types of medical expenses are eligible for deductibles. These include premiums paid to private healthcare corporations, prescription pharmaceuticals, physiotherapy, naturopathic treatments, nursing care, public or private hospitals, and specialist medical aids, including heart-monitoring equipment, electrotherapy devices, eyeglasses, and hearing aids.
Remember that you must pay for medical expenses through private or provincial plans before you can deduct them from your taxes. Furthermore, the amount you declare on your tax return and the amount you paid have to match. Need assistance with tax filing? Get in touch with Billah and Associates Tax Accountant today.
Do you want to know what additional costs you can write off? The following is the list:
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Artificial Eyes or Limbs:
Contact lenses, together with the tools and supplies needed to wear them.
Medical costs (this varies by province; for more information, please see the CRA).
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Diabetes Supplies:
Diabetes treatment supplies such as syringes, insulin, infusion pumps, and needles; insurance payments for health insurance through Blue Cross or Canada Life plans; and laboratory expenses.
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Medical Supplies:
These include wheelchairs, crutches, braces, eyeglasses, contact lenses, hearing aids, and guide dogs (as well as their upkeep).
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Pregnancy Costs:
Treatments for pregnancy and lactation, as well as in vitro fertilization.
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Logistics Costs:
Costs associated with traveling and lodging when seeking medical attention outside of your hometown (must keep note of mileage, date, and purpose for a visit).
If this list does not include your medical costs, you can verify your eligibility using the helpful search tool the CRA provides. Examining the less evident medical expenses that are deductible highlights more tax-saving options and highlights the significance of careful recordkeeping and physician consultation.
Can Family Medical Expenditures Be Claimed?
- You and your spouse are eligible to deduct medical costs for members of your immediate family. Children born to either partners or stepchildren under the age of eighteen are included in this.
- You can also deduct medical costs you spent for other people who are dependent on you but are not your biological children or stepchildren. Add those costs to line 33199.
- Must have been a resident of Canada for all or part of the year to claim medical expenditures for any family members.
Who Pays for the Medical Costs in a Couple?
Deciding who in a couple should pay for medical expenditures can take some forethought. To optimize the possibility of a tax refund, it is preferable that the spouse with the lesser income file the claim.
If you claimed the disability support deduction on line 21500 or medical costs on line 33200 on your tax return, you may be eligible for the medical expenditure supplement. The majority of working individuals who have high medical expenses and low incomes are qualified for this refundable tax credit.
Is it worth claiming medical expenses on taxes in Canada?
Knowing how to claim medical expenses on your income tax and how medical expenses might affect your tax return will help you decide whether to claim them or not. Medical expenses are deductible for any 12-month period that ends in the taxation year.
The option to carry over certain unclaimed expenses to the following year makes planning a crucial component of your tax strategy toolkit. To make educated selections, you need to know how to claim medical bills.
Conclusion
In Canada, you can reduce your tax liability by deducting medical expenses from your income tax. You can maximize your tax return by finding out what qualifies, utilizing tax credits, and making appropriate plans for your circumstances.
Medical Expense Tax Credit (METC) FAQs
Can medical costs be deducted from prior years?
If this is your first time claiming them, you can write off medical expenses that you spent over any 12-month period that ends in the current tax year.
Do you have any other strategies for lowering my medical costs?
Indeed, incorporated business owners can convert 100% of their post-tax medical expenses into pre-tax business deductibles by using a Health Spending Account (HSA), a strategy recognized by the Consumer Reports (CRA).
How are HSAs operated?
The HSA is fundamentally a contract that you have with your company. The agreement is predicated on CRA regulations. This permits your company to pay for medical bills that you have paid for yourself out of pocket. For your business, the reimbursements are entirely tax-deductible, and they are 100% tax-free for you.
