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Fredericton Daily Gleaner ~ Capital Appreciation ~ Medical Expenses ~ April 16, 2007 - 06 May 2007 by TaxHelp
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Medical expenses.
Roger Haineault – “Capital Appreciation” – April 16, 2007.
My friend Paul is reporting back to work today after an extended absence due to illness. And while he normally enjoys extremely good health, it’s not unusual to incur a number of medical expenses during the course of the year that might actually benefit you when you complete your tax return.
Eligible medical expenses over your net income threshold qualify for a non-refundable tax credit worth about 25 per cent on your combined federal-provincial taxes. The expenses must have been incurred in a twelve month period, provided it ends in the year, so it is possible that the period could be defined as November 1, 2005 to October 31, 2006 if that is more advantageous.
To calculate this, take the total medical expenses incurred by you and your spouse and subtract three per cent of your net income. Someone with $30,000 of net income has a $900 threshold to cross before they can begin to claim. The maximum threshold for 2006 is $1,824 on the provincial schedule and $1,884 on the federal form. As a result, the lowest income spouse should make the claim if he or she is taxable, as the income threshold will be lower, thereby allowing for more expenses to be claimed.
One area of medical expense that is often overlooked is your premium paid to acquire health insurance. Include your medical and dental premiums, even if it's through your employer - provided you paid. Another area that is sometimes forgotten is eyeglasses, since they have become a fashion statement. However, if they are prescribed, they are in. As an aside, claim only the amount of medical expenses you actually paid, and were not reimbursed for. You also want to claim the co-insurance portions not reimbursed by your carrier. Typically these are 20 per cent of the bill and may also have a user-pay deductible amount. Normally the deductible is in the $25 to $50 range. Both the co-insurance and the deductible can be included as a medical expense.
Most people think of travel as being a deduction for those who are self-employed or on commission and drive to earn a living. While that is true, it's also valid anytime you seek medical attention that is not available in your home community and requires you to travel at least 40 kilometres one way. Although you've always been able to claim the actual expense, in the past this has been unwieldy. To make it easier, the Canada Revenue Agency (CRA) introduced the Simplified Method as an alternative way of calculating the claim. For 2006, it allows for a calculation based on a flat 47.5 cents per kilometre in New Brunswick. It does not require receipts. All the taxpayer requires is a log of the distance which is easily available in today’s era of technology if you have access to the internet. Go to googlemaps.com and enter “your postal code to the facility’s postal code” and not only will directions and a map be displayed, but the distance will be indicated. Don’t forget to double the distance, since one presumes it is a return trip. Take a print of this for your records, in case you need proof. Then get a letter from the facility showing the days you attended.
Someone 65 kilometres away from care can claim more than $60 with each trip to the hospital. For those who have to travel 80 kilometres or more one way, the claim is enhanced to include meals and accommodation. With the rationalization of health care, it is not unusual to hear of people who must seek medical assistance in Halifax. A return trip to the IWK Children's Hospital in Halifax represents about 900 kilometres, or more than $400, under the Simplified Method. The enhanced claim also allows for food to be expensed at $17 per meal without a receipt, to a maximum of $51 a day per person. If accommodation is required, documentation must be furnished if requested. In either of these situations, if the patient is certified as unable to travel without an attendant, an additional claim for the travel costs may be made for a traveling companion.
Just a reminder that many people were pleasantly surprised when they filed their 2005 income tax return if they normally had lots of medical expenses within their circle of dependants. As an aside, the definition also includes parents, grandparents, siblings and other family members, provided they are dependant upon you for support. The maximum allowable claim was increased to $10,000 per dependant. They are subject to the same rules as you are, so in preparing the claim you must consider their net income and the three per cent carve out.
Finally, my friend Paul might have received some form of disability payment while he was off work. If he paid for this out of his own pocket, or fully funded it through his employer, this benefit is tax free and should not be reported. However, if the employer paid the total disability premium, Paul will be issued a T4A and the payment will be taxable. But if Paul paid any of that premium, he may deduct the total that he paid since his last claim against this income and he will then only report the difference. The payroll department will be able to provide that value, and again, document the file with a letter from your company.
Just a reminder – April 30 is two weeks from today. With all the changes, this might be the year to contract out the job and seek professional help.
Roger Haineault is with Help 4 Taxes. He can be reached by email at roger@help4taxes.ca or by calling 443-HELP (4357). His column appears Mondays. |
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