Child Oncology Patients And Children With Permanent Disabilities
In the case of children receiving treatment for cancer and children with permanent disabilities, you can claim taxrelief on the following as health expenses:
Telephone: Where a child oncology patient or a child with apermanent disability is being treated at home, you can claim a flat ratepayment to cover telephone rental and calls where those expenses are incurredfor purposes directly connected with the treatment of the child.
Overnight accommodation: Tax relief is also allowable forparents or guardians of child oncology patients and children with permanentdisabilities where the child needs to stay overnight in a hospital as part oftheir treatment and the parent or guardian is required to stay nearby. Reliefis allowable on payments made to the hospital and/or hotel or bed-and-breakfastnear the hospital for accommodation.
Travel: The cost incurred in travelling to and from any hospital for:
- The patient and accompanying parents or guardians and
- Parents or guardians of the patient
Where such trips are shown to be essential to the treatment of the child.There is a mileage allowance if you use a private car.
Hygiene products and special clothing: Tax relief is alsoallowed for parents/guardians of child oncology patients and children withpermanent disabilities for the cost of hygiene products and special clothing.This is subject to a maximum of â¬500 per year.
How To Deduct Your Medical Expenses
The medical expense tax credit is one of the most overlooked non-refundable tax deductions. Although most Canadians are aware that the medical expense tax credit exists, many fail to keep the necessary receipts or running tally of expenses.
This tax credit can also be claimed for your spouse, common-law partner, and children under 18 years of age. You can also claim medical expenses for your dependents and your spouses or common-law partners dependents such as parents, grandparents, siblings, aunts, uncles and nieces and nephews.
A portion of the credit comes from the federal government, and a smaller amount is allowed by the provincial and territorial governments. Claim the corresponding provincial or territorial non-refundable tax credit on line 58689 of your provincial or territorial Form 428.
Itemized Deduction: You Dont Have To Be Self
Any itemized deduction should be weighed against the standard deduction amounts. For 2021, the standard deduction is $12,550 for individuals, $25,100 for married joint filers, and $18,800 for those who file as head of household. Most people come out ahead with the standard deduction, but the best approach will depend on your specific circumstances.
If you are planning to itemize, you can include out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income . Your Medicare premiums, deductibles, coinsurance, and copayments can all be counted towards your total medical costs, as well as other medical costs that might not be covered by Medicare at all, such as dental, vision, hearing, and long-term care expenses.
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Deductions For Qualified Unreimbursed Healthcare Expenses
However, you may be able to deduct some of your premiums if you purchase health insurance on your own using after-tax dollars. For the 2020 and 2021 tax year, youre allowed to deduct any qualified unreimbursed healthcare expenses you paid for yourself, your spouse, or your dependentsbut only if they exceed 7.5% of your adjusted gross income .
AGI is a modification of your gross income. It includes all your sources of incomewages, dividends, spousal support, capital gains, interest income, royalties, rental income, and retirement distributionsminus any number of allowable deductions from your income, including retirement plan contributions, student loan interest payments, losses incurred from the sale or exchange of property, early-withdrawal penalties levied by financial institutions, among others.
This is a lower amount than in 2019, in which any healthcare costs that were greater than 10% of AGI were eligible for the deduction. In 2017 and 2018, the cutoff was also 7.5%.
Expenses that qualify for this deduction include premiums paid for a health insurance policy, as well as any out-of-pocket expenses for things like doctor visits, surgeries, dental care, vision care, and mental healthcare. However, you can deduct only the expenses that exceed 7.5% of your AGI.
Private Health Insurance Benefits For Self
Private health insurance is an important consideration for the self-employed. As a self-employed individual, you do not have a health plan through an employer, and you are limited to the medical coverage you receive through OHIP. Rather than paying out of pocket, consider private health insurance to provide you with the coverage and peace of mind you are looking for.
As outlined on TaxTips.ca, If a person is self-employed, the premiums paid for a private health services plan can be deducted from self-employment income, instead of being claimed as a medical expense. This would result in greater tax savings, and is a way to provide a tax-free benefit to employees of a small business.
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Seek Out Help If You Have Questions
Its pretty prudent to get some good tax guidance, particularly in the startup years, to make sure youve identified most if not all the tax benefits, says Steber. Those benefits can really jump-start your savings, they can help preserve retirement income, and put a lot of income on your bottom line if you know where to look.
Taxes are intimidating to most of us, and each year brings changes in forms, new legislation, and a myriad of other alterations which seem to further complicate the process. Whether you file on your own, or seek the help of a tax professional if you are self-employed and paying Medicare premiums, being able to deduct the cost of those premiums can help your bottom line.
Start early, get your documents together, and if you had a life change even just a small one get some questions answered, its just a smarter way to save money.
This information is provided as background only. As with any issue related to your taxes, you should seek advice from a tax professional if you have questions about your specific circumstances.
Jesse Migneault is a journalist and editor who has written about business, government and healthcare including public and private-payer health insurance. His articles have appeared in HealthPayerIntelligence, the Hartford Courant, Portsmouth Herald, Seacoastonline.com, Fosters Daily Democrat, and York County Coast Star.
Who Qualifies For Medical Expense Tax Deductions
The Internal Revenue has two critical eligibility rules for people who dont own a business:
- A standard deduction is $12,400 for singles, $18,650 for heads of household and $24,800 for married joint filers for the 2020 tax return. If your tax deductible health insurance costs dont exceed those limits, its best to go with a standard deduction rather than itemize your health care deductions.
- Your health care costs must exceed 7.5% of your adjusted gross income for 2020 tax filings. The AGI is what you earn in wages, investments and other sources minus things like alimony and student loan interest. You can find your adjusted gross income on line 37 of Form 1040. Note: starting with 2021 taxes, medical costs will have to exceed 10% of your AGI.
So, the first question to answer is: How many eligible health care costs do you have? If your health care costs are less than the standard deduction amount, you should take the standard deduction instead.
Chris Peterson, tax manager at CB Smith & Associates, said most people take the standard deduction rather than itemize health care deductions because they dont exceed the standard deduction level.
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What If I Receive Health Benefits From My Employer
If you happen to work for a company that pays for your health plan, then those costs cannot be claimed as health expenses, since they would be paid for directly through your plan or reimbursed to you.Although you cannot claim plans paid by your employer, you can claim what you pay out-of-pocket. This means that all eligible medical expenses not covered by a health insurance plan may be claimed. For example, let’s say you went to the dentist. Your charges were $500, but your health insurance plan only reimbursed you for $300. You can then claim $200 since that is what you paid out-of-pocket. Remember, you can only claim the portion of the premiums you pay yourself, not any amount covered by your employer.
Other qualifying medical expenses are premiums you pay for yourself, your spouse, common-law partner, or for anyone you are connected to by blood to a private health services plan . These expenses can be claimed on your income tax and benefit return. Refer to the CRA website for more details.
Deducting Premiums Paid For A Private Health Insurance Plan
While the Medical Expense Tax Credit can significantly reduce your taxes, it is not always obvious which medical expenses are eligible. Payments of premiums for private health service plans may qualify if they meet certain criteria, while others are excluded. It is important to know if any of your payments are eligible towards this credit.
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What Are The Most Common Medical Expenses That You Cannot Claim
There are some expenses that are commonly claimed as medical expenses in error. The expenses you cannot claim include the following:
- athletic or fitness club fees
- birth control devices
- blood pressure monitors
- cosmetic surgery expenses for purely cosmetic procedures including any related services and other expenses such as travel, incurred after March 4, 2010, cannot be claimed as medical expenses. Both surgical and non-surgical procedures purely aimed at enhancing ones appearance are not eligible. Non-eligible cosmetic surgery expenses include:
- filler injections
- teeth whitening
A cosmetic surgery expense may qualify as a medical expense if it is necessary for medical or reconstructive purposes, such as surgery to address a deformity related to a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease
- diaper services
- over-the-counter medications, vitamins, and supplements, even if prescribed by a medical practitioner
- personal response systems such as Lifeline and Health Line Services
- provincial and territorial plans such as the Alberta Health Care Insurance Plan and the Ontario Health Insurance Plan
- the part of medical expenses for which you can get reimbursed, such as reimbursements from a private insurance
Payments Of Premiums For Private Health Services Plans
As a rule, premiums that are paid to private health services plans including medical, dental and hospitalization plans are considered to be eligible medical expenses by the Canada Revenue Agency. Furthermore, any premium, contribution or other consideration including sales and premium taxes that you pay to a private health services plan for yourself, your spouse or your minor children, is an eligible medical expense.
However, the plan you make the payments to must qualify as an eligible private health services plan. When changes were made a few years back, the CRA adopted a less restrictive position regarding which plans are considered eligible. They now consider a plan to be eligible as long as all or substantially all of the premiums paid under the plan relate to medical expenses that are themselves eligible for the Medical Expense Tax Credit. The plan must also be an insurance plan, instead of another form of contract. To be considered as substantial, the CRA refers to approximately 90 percent or more.
Previously, the CRAs position was that 100 percent of the premiums had to be paid to be considered as eligible medical expenses. The rule now means that plans that offer some non-eligible benefits can still be considered eligible, if these benefits are less than 10 percent of the total benefits.
Plans that are paid by an employer and most mandatory provincial health plans are not eligible to be claimed as health expenses.
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Personal Health Care Costs Are Increasing
Its no secret that personal health care costs are on the rise in Canada. According to the Canadian Institute for Health Information, the average Canadian spends more than $1,500 per year on prescription drugs, and this number has increased by 12% since 2005.
Although you are provided with health care coverage through OHIP, there are many health services that OHIP doesnt cover, which means you must pay for medical expenses out of pocket if you do not have health insurance coverage through your employer.
Without group insurance or private health insurance, you might need to pay out of pocket for unexpected medical expenses if you become ill or are diagnosed with a condition that requires regular medical care and medication.
For this reason, an increasing number of Ontario residents are opting for personal health insurance to help pay for health care expenses that are not covered by OHIP. Private health insurance gives you the peace of mind in knowing that you are covered for dental fees, doctor and hospital visits, prescription drugs and even travel insurance.
However, there is one additional and commonly overlooked benefit of investing in personal health care insurance: the premium you pay is an eligible tax deduction under the Income Tax Act in Canada.
How To Maximize Your Health Care Deductions
You cant control when you need health care. However, you can bunch up procedures to maximize deductions.
Say you have a handful of nagging health issues. Theyre not life-threatening, but theyre affecting your quality of life. You could decide one year to get all of those pesky problems fixed, reach the tax deductible threshold and apply for a deduction at tax time.
One last piece of advice — you don’t need to attach receipts to your 1040, but it’s a good idea to keep them for three years after filing your return just in case the IRS audits you.
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For Which Period Can You Claim These Expenses
You can claim eligible medical expenses paid in any 12-month period ending in 2020 and not claimed by you or anyone else in 2019. For a person who died in 2020, a claim can be made for expenses paid in any 24-month period that includes the date of death if the expenses were not claimed for any other year.
The Medical Expense Deduction
Health insurance costs are included among expenses that are eligible for the medical expense deduction. You must itemize to claim this deduction, and its limited to the total amount of your overall costs that exceed 7.5% of your adjusted gross income in the 2020 tax year, the return filed in 2021.
This threshold was historically 7.5% until 2013 when it increased to 10%, although it remained at 7.5% for taxpayers who were age 65 or older, at least for a little while. Then, as of December 31, 2016, all taxpayers were supposed to meet the 10% threshold to be able to claim this deduction, regardless of their age.
The Tax Cuts and Jobs Act restored the threshold to 7.5% retroactively for 2017 and going forward through 2018. It was slated to hike back up to 10% in 2019, then the Further Consolidated Appropriations Act extended the 7.5% threshold indefinitely.
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Is Health Insurance Tax Deductible
Possibly, if you pay health insurance premiums with after-tax dollars and your total medical expenses exceed 7.5% of your AGI, you can generally deduct them. Most group health insurance plans are paid using pre-tax dollars, but check with your employer to be sure. Medicare A , Medicare B and Medicare D premiums are all generally tax deductible. If certain criteria is met, self-employed individuals are sometimes able to deduct their health insurance premiums, even if their expenses do not surpass the 7.5% threshold.
What Amount Can You Claim
Line 33099 You can claim the total of the eligible expenses minus the lesser of the following amounts:
- 3% of your net income
Line 33199 You can claim the total of the eligible expenses minus the lesser of the following amounts:
- 3% of your dependant’s net income
The maximum provincial or territorial amount you can claim for medical expenses may differ depending on where you live. For more information, see the information guide for your province or territory of residence in your income tax package. If you live in Quebec, visit Revenu Québec.
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Health Insurance Premiums That Are Tax
Any health insurance premiums you pay out of pocket for policies covering medical care are tax-deductible. When preparing your taxes, you can deduct these expenses for yourself, your spouse and your dependents.
Premiums for insurance purchased through COBRA are deductible, as are Medicare premiums for Part B and D. If you are not enrolled in Medicare under Social Security and are not a former government employee who paid Medicare tax, premiums paid for Medicare A are also tax-deductible.
If you buy health insurance through the federal insurance marketplace or your state marketplace, any premiums you pay out of pocket are tax-deductible.
If you are self-employed, you can deduct the amount you paid for health insurance and qualified long-term care insurance premiums directly from your income. This reduces your adjusted gross income , which lowers your tax bill. You may also be able to deduct medical and dental expenses as itemized deductions on Schedule A of IRS Form 1040.
Whether you’re employed or self-employed, however, you can’t deduct all of your medical expensesonly the amount exceeding 7.5% of your adjusted gross income.
Life & Health Insurance Offered By Td
TD Accident and Sickness Insurance can provide financial coverage to help you and your family in the event of a covered critical accident or illness resulting in disability, a serious injury, or death. Supplement any existing coverage you may already have through life insurance, employee benefits, or your provincial health care plan. Although these payments may not be tax deductible, benefits are received tax-free.
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