You can’t claim medical expenses unless it’s 3% or more of your income, which is considered significant medical expenses.
What we find it’s very rare people sneak over the 3% threshold. By the time you’re paying out of pocket $2,000, you’re usually way over, sometimes $4,000, $5,000 or $10,000.
The CRA is saying it wants to reimburse you for some of the treatments by giving 15% of your expenses back, but they do have strict criteria and will be looking for things that are there by mistake.
For instance, your doctor may tell you to get more Vitamin D, but that’s not deductible as the claimable expense only applies to prescriptions.
If you have celiac disease, you can deduct the food you have to buy, but you have to figure out the difference of a cost of regular bread vs gluten free bread, making it a pain in the ass. It is not deductible if it’s just an intolerance or sensitivity, the doctor would have to diagnose you as having celiac disease and you have to keep track of the price differential.
You have to ask yourself – is this medically necessary? If you can answer ‘yes’ to the question, it’s probably deductible. Fixing a gap in your teeth? Likely deductible. Teeth whitening? Not deductible. Your prescription for medical marijuana? Deductible. The ingredients for your special brownies? Not deductible.
If you think you have significant medical expenses but aren’t sure which ones you can claim, please get in touch.
Foreign tax credits
The CRA keeps moving the goalpost on what they expect to see from people who do business in a foreign country.
Three years ago, it wanted to see your US tax return.
Then it was asking for your IRS assessments.
Now it sometimes wants to see cancelled cheques.
The easiest way to navigate constantly changing rules is by working with an accountant who knows the rules on both sides of the border.
Disability tax credit
The CRA recently expanded the Medical Expense Tax Credit to include service animals that perform certain tasks for people with severe mental impairments such as (from Canada.ca) a psychiatric service dog trained to perform specific tasks to assist with post-traumatic stress disorder. This is in addition to the tax credit available for service animals who helped those with physical impairments.
Any time the CRA introduces anything new, there tends to be a fair bit enforcement because the opportunity for fraud is rampant. If you are claiming a tax credit for someone who has a severe mental impairment, make sure that you’ve dotted your I’s and crossed your t’s.
The CRA is well aware that people will try to take advantage of this tax credit. The question is what constitutes severe mental impairment? Here is a guide from the CRA. https://www.canada.ca/en/revenue-agency/services/tax/individuals/segments/tax-credits-deductions-persons-disabilities/information-medical-practitioners/mental-functions-necessary-everyday-life.html
An unusually large donation can sometimes trigger the CRA to question the legitimacy of your claim. If you have a philanthropic bent, make sure that you have all your documentary.
One of the things we do with our clients who make large donations is proactively asking for the donation receipts so that they are on hand if the CRA asks for them. We look at areas flagged by the CRA.
Some things to keep in mind:
- A donation to a US charity is deducible only against US income
- A lot of crowd funding sources are for-profit – if you donate through one of those sites, it’s not considered charity and you cannot include that as a deduction.
If you have questions about your taxes, please get in touch!