If you find yourself frantically looking through your 'box of important paperwork' every year leading up to tax time only to come up with five prescription receipts an hour later worth a total of $50, have you ever wondered if it is worth your time?
The first thing to keep in mind that medical expense claims are subject to a dollar threshold on your personal income taxes. What this means is if your total medical expenses for the year are below the threshold you will not be able to claim them on your income tax return.
Determine whether your medical expenses will exceed the threshold:
The Canada Revenue Agency implements a dollar amount threshold that your total medical expenses must be before any tax savings can occur. Before you spend time searching through all your medical receipts try to do a quick mental calculation to determine whether your medical expenses will exceed the threshold.
STEP 1: Determine your threshold. Take your approximate income for the year and multiply it by 3%. If you have a spouse, use the spouse with the lower income to multiply by 3%. If 3% of the income is lower than $2,352, then the calculated amount is your threshold. If the calculated amount is higher, then $2,352 is your threshold.
For example:
Situation 1 - Your income for the year is $35,000 x 3% = $1,050. The calculated amount is lower than $2,352 therefore this is your medical expense threshold for 2019.
Situation 2 - Your income for the year is $80,000 x 3% = $2,400. The calculated amount is greater than $2,352, therefore, your threshold would be $2,352.
STEP 2: Estimate your total eligible medical expenses. This includes medical expenses for the year for both you and your spouse, as well as any eligible dependents. Estimate the total amount paid and reduce the total by any amounts reimbursed through a benefits plan.
STEP 3: Compare your total estimated medical expenses to your threshold. If your estimated medical expenses are nowhere near the threshold amount, then it is likely you won't be able to claim them on your income tax return. If your estimate is close to your threshold then it is probably worth it to dig through all your receipts.
Hopefully this helps your income tax preparation!
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