Does Your Tax Return Need A Check-Up? Fall 2005

Four years ago, Virginia Wang was diagnosed with Crohn's disease. She was able to start a new job, even with her intermittent hospital stays. She was able to change her eating habits and her reaction to stress. She wasn't prepared, however, for the cost of prescription medication and over-the-counter medications to treat symptoms — this amounts to $3,000 over what her benefit plan covers. Luckily for Wang and others like her, there is a way to get some of these costs back.

If your total medical expenses exceed $1,844 or 3% of your net income (line 236), whichever is less, your medical expenses can add up to a 26% tax savings, including both federal and provincial tax credits.

While group benefit premiums vary largely from company to company, the average Canadian is currently paying $80 per month for health benefits. Over the year, this amounts to $960. If you find yourself and your spouse paying over and above this amount to cover your medical expenses, you can probably take advantage of the medical expenses tax credit.

Where do I start?
First, contact your payroll department to ascertain how much of your premium pays for health and dental benefits alone. Use this number when calculating your overall expenses.

You can claim medical expenses for any 12-month period ending in the current tax year of filing. Choose the period with the highest amount of expenses to have the most impact on your tax return.

Next, decide which spouse should claim the family's medical expenses. Having the lower-income spouse claim the credit will work to your advantage if the lower income spouse is taxable and can use all the medical expense credits.

Who qualifies?
On your tax return there are two lines where you can claim your medical expenses. Medical expenses for you, your common-law partner or spouse, and those for children born in 1987 or later can be claimed on line 330.

Other dependants including your parents, grandparents, children born in 1986 or earlier and other family members residing in Canada can be claimed on line 331. Calculate the medical expenses for each dependant on line 331. The total amount of expenses must exceed $1,844 or 3% of the dependant's net income (line 236), whichever is less. This is to a maximum of $5,000 for each dependant you claim.

If you are a caregiver for a dependant spouse, child, grandparent, grandchild or other family member (aunts, uncles, brothers, sisters etc.), you can claim a medical expense tax credit. This is for personal expenses incurred on behalf of the dependant.

Specialized Deductions
Many types of specialized medical equipment, services and treatment can also be claimed. Just remember your doctor will have to certify it is medically necessary. If you submit receipts without a medical certificate, the expense will not be allowed.

For example, if your child has severe allergies and you were told to install an air conditioner, get your doctor to write a medical certificate. The costs of an air-conditioning unit and the energy costs to operate it are considered a qualifying expense. Costs incurred for purchasing air ionizers and filters, mattress covers, anti-allergen filters and other prescribed allergy aids are also allowed.

How can I make this easier?
Organize your medical receipts before you file your income tax return. Some people find it helpful to wait until after December 31 (or earlier if you are using the best 12 months) and ask their pharmacy for a detailed print out of the year's prescriptions instead of adding up individual receipts, as these can be misplaced or lost.

Make sure you have any medical certificates necessary before you file your tax return and remember most health care professionals charge a fee for this service — and this fee is also considered a medical expense.

Knowing what to claim and how to maximize your tax return makes tax time easier to bear. A little pre-planning and attention go a long way.

	What Services Qualify?
			Payments to doctors, dentists, nurses, physiotherapists and
			occupational therapists, chiropractors and certain other related
			health professionals
			Costs incurred for prosthesis, wheelchairs, crutches, hearing
			aids and other personal listening devices that aid hearing,
			prescription eyeglasses and contact lenses, dentures,
			pacemakers, prescription drugs and other prescribed medical
			devices
			Supplies for insulin-dependent diabetics, patients with an
			ostomy or illeostomy, oxygen therapy, enteral-parenteral
			feeding and other home care supplies
			Attendant care expenses paid for wages and salaries for food
			preparation, housekeeping, laundry, health care, salon
			services and transportation when medically necessary
			Tray fees for injections, stitches and other in-office
			procedures not covered by your provincial health care plan or
			private health insurance
			Expenses for medical transport (ambulance, air transport and
			stretcher service) not covered by private or provincial health
			insurance
			Costs associated with medical-related travel (including out-of-
			country travel) as long as similar treatment is not available
			within 100km
			Tutoring certified by a medical practitioner for an individual
			with a learning disability or mental impairment