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Quick Guide: Who should claim medical expenses on taxes - Canada

Posted by Alden Hui on July 12, 2018
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Canadians can claim the medical expenses on their taxes through a non-refundable tax credit known as the Medical Expense Tax Credit (METC).

This tax credit is determined by a formula which can involve the eligible medical expenses of yourself, your spouse, and any eligible dependants.

To answer the question of who should claim medical expenses on taxes, we must look at a variety of factors:

General Rule

In most cases, you are getting better value when claiming the medical expenses of your entire family through one tax return. This means yourself, your spouse (or common-law partner), and a child of the individual or individual's spouse (or common-law partner) that is under 18.

Tip: If you have an insurance plan, make sure you keep track of which medical expenses are reimbursed. You cannot claim medical expenses (or portions of medical expenses) that have been reimbursed by an insurance plan.

Case Study

If both the individual and spouse have taxable income, then you will typically get a higher tax credit when claiming through the lower net income individual. The METC is determined by taking the lesser of $2,268 (2018) or 3% of your net income and subtracting it from your eligible medical expenses. As a result, a lower net income will result in a smaller number subtracted from your eligible expenses, which will ultimately lead to a larger tax credit.  

Note: $2,268 is a fixed amount which is changed annually to compensate for inflation and other factors

Exception: If the lower net income individual has no taxes owed/taxes payable, then the credit serves no purpose. The Medical Expense Tax Credit is non-refundable, meaning it cannot bring your taxes owed above 0. Therefore, make sure the person claiming the credit actually owes enough taxes to maximize the credit. In a situation where one person has little to no taxes payable, claim the medical expenses via the higher income earner. 

To maximize your savings, do the actual math and see which creates the better deal. We've created a calculator to help you speed up the process:  

Try our Medical Expense Tax Credit Calculator to see whether you or your spouse gets a higher tax credit.

What qualifies as an eligible dependant?

An eligible dependent varies depending on the tax credit that you are claiming for. For the purposes of this article, we will be discussing what makes an eligible dependant for medical expense claims through the METC

It is important to know that there is a separate calculated amount for dependants.

The CRA defines an eligible dependant as the following (all must apply):

  • a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, nice or nephew of the individual or of the individual's spouse or common law partner
  • dependant on the individual for support at some time in the year
  • a resident of Canada at some time in the year

This second calculation uses the dependant's net income as opposed to the your own.

You can only claim on amounts that you personally paid for the dependant's medical expenses. 

Tip: When storing receipts, make sure to indicate the purpose, date, and patient for the payment. Additionally, include the medical practitioner (if possible).

Are you an incorporated business owner?

Set up a Health Spending Account (HSA) to pay for your medical expenses with before-tax dollars. This CRA-approved alternative for business owners turns your after-tax medical expenses into before-tax business deductions. It works for a family business (such as an independent consultant) or a business with arm’s length employees!

To learn more about a Health Spending Account, download our FREE Beginner’s Guide:

beginner's guide to health spending accounts HSA 2020 eligible expenses

Note: A Health Spending Account cannot be used with the METC because that would be "double-dipping" or getting compensation twice. If you are using an HSA, then you are already eliminating the taxes on your medical expenses.

Topics: medical expenses, medical expense tax credit