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Medical Mathematics.

Medical Mathematics.

March 9, 2021

“My health insurance company isn’t covering about $1000 of my medical expenses  in 2020.  Can I deduct these on my income tax?”-Ariza, Toronto

We don’t like saying this. The answer is “that depends on your situation”

The Canada Revenue Agency provides an exhaustive resource to learn more.

For the purposes of this post we will stick with more common concerns.  The rules surrounding care in nursing homes, or those who claim the disability amount are much more complex.  We urge you to follow this link for eligibility and other information  

Ariza’s medical expenses all fit under the eligibility requirements.  She can enter them into the appropriate spot on her return.

However, there’s a little more mathematics to do. (Our software will take care of it for you, but it’s good information to know)

Your medical expense deduction is also affected by your net income.  Ariza had a net income last year of 25 thousand dollars.

Under Canada Revenue rules, Ariza must deduct 3 per cent of her net income or $2397 dollars, which ever is less. Here’s how Ariza’s math works out

Medical Expenses :  $1000

3 percent  of 25000:    $750

Medical expense deduction:  $250

But wait, there’s more!

The Medical expense deduction is classified as a non-refundable tax credit.

A non refundable credit used to reduce the amount of tax payable by you.  If those credits add up to more than you owe, you will not receive the difference as a refund.

We don’t know if Ariza has a partner, but if she does there is another consideration.  You are allowed to combine the medical expenses for all eligible family members under the age of 18 on one return.  At CloudTax we recommend running through the calculation for both partners. Of course, our tax experts are always available to help you out.

One more twist:

You are allowed to claim medical expenses over any 12 month period ending in the current tax year. You cannot have claimed those expenses in a previous year.

As an example, perhaps you paid a significant amount for health care  in November of 2019, but didn’t claim them on that return.   On your 2020 filing you could claim expenses from November 1 2019 to October 31 2020 covering those expenses.

Once again, we caution everyone’s situation is unique and we encourage you to approach us with any questions.

Good health!  And happy filing!

 

 

 

 

 

 

Nimalan Balachandran is the Founder & CEO of CloudTax, an income tax filing platform, certified by the Canada Revenue Agency, that allows simple tax filers to file their taxes from home. He was a former employee at the Canada Revenue Agency, and has been in the tax preparation industry for over 10 years. His goal was to bring his passion for technology and assisting Canadians in minimizing their taxes together, by building new software that allows Canadian residents to file simple taxes on their own. Along with his background in accounting, finance, artificial intelligence & business strategy from Seneca College and Massachusetts Institute of Technology, Nimalan has also worked as a Financial Advisor at Sun Life Financials. Nimalan also co-founded a not-for-profit organization, ATI Foundation, serving individuals with intellectual and physical disabilities in the Greater Toronto Area.



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