| Mar 24, 2005

Legalese: Distance, medical expenses and income tax March 2005

LegaleseMarch, 2005

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Distance, Medical Expenses and Income Tax

Income Tax - two words which, if you have to pay, can invoke all the unpleasantness of a toothache or the whirring of a dentists drill! While income tax is generally accepted as a necessary tithe to support essential government services, human nature being what it is, there arent many of us willing to pay one cent more than we have to.

On the brighter side, you can reduce your tax burden by taking advantage of all available tax credits and deductions. One such credit that can have a silver lining for rural residents who must travel for medical treatment is the medical expense tax credit.


Under the Income Tax Act certain medical travel expenses are recognized as allowable medical expenses that can be claimed as a non-refundable tax credit. The medical expense tax credit is a non-refundable credit that reduces the amount of federal tax payable. It is non-refundable because even if you do not need the full amount of the credit to reduce your federal tax payable to zero you will not receive a refund of the remainder.

Medical travel expenses that qualify as medical expenses for the purposes of the non- refundable credit include transportation costs to medical and dental appointments at least 40 km away (provided treatment is not available locally), as well as meal and accommodation costs when travelling more than 80 km.

The Income Tax Act provides both a detailed and simple calculation method, for determining medical travel expenses. Under the simple method the expense is equal to the number of kilometres travelled multiplied by the allowable cent per kilometre for the province or territory where your travel began. In Ontario the current rate is 45.5 cents/km. A simple or detailed method is also available for calculating meal expenses.

For the 2004 taxation year you can claim medical expenses (including medical travel expenses) that you paid for yourself, your spouse or common-law partner and your dependants in any 12-month period ending in 2004 that you did not claim in 2003. In order to claim the medical expense tax credit your total medical expenses must exceed the lesser of:

? 3% of your net income, or

? $1,813.00.

Additionally, you can only claim medical or dental expenses for which you were not and cannot be reimbursed. Consequently expenses covered by either the public, or your private, health insurance plan cannot be claimed.

Also, not all medical expenses can be claimed for the purposes of the medical expense tax credit. Only those expenses stipulated under federal Income Tax legislation qualify. Examples of qualifying medical expenses, in addition to medical travel and accommodation costs, include:

? Payments to a doctor, dentist, or nurse, or to a public or private licensed hospital;

? Payments for artificial limbs, wheelchairs, crutches, hearing aids, prescription eye glasses, contact lenses, laser eye surgery, dentures, pacemakers, and prescription drugs;

? Expenses for guide dogs and hearing-ear dogs;

? Payments for certain prescription medical devices;

? Some of the expenses for modifying your home or motor vehicle to allow you, your spouse or a dependant to be mobile and functional if either you or they have a mobility impairment or lack normal physical development;

? The cost of visual or vibratory signaling devices, such a visual fire alarm, to help people with a hearing impairment;

? Payments for therapy to help people adjust to speech or hearing loss, including training in lip reading and sign language;

? The cost of traveling by ambulance to or from hospital.

The above list of qualifying medical expenses is not exhaustive nor can this column possibly cover all the technicalities of determining eligibility for, or calculating and claiming the medical expense tax credit. Everyones situation is different.

However, if youve managed to wade through the column this far and would like more information you may wish to:

? talk to an accountant;

? telephone the Canada Revenue Agency (CRA) at 1-800-959-8281; or

? visit the CRA web site @ www.cra-arc.gc.ca

Remember the deadline for filing your personal income tax return is April 30, 2005.

Susan Irwin, Lawyer/Executive Director

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