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 The
Money Management Newsletter: Retirement
Income Planning
Eldercare: Under a microscope
Part 1 of 6: Medical
Related Expenses
By Anne Chun,
C.A., CFP
Money Management Newsletter - February 2004
In this article, we will
examine a number of tax treatments for medical related expenses. Future
articles will deal with each tax treatment in greater detail.
Please note new age limit (now age 71, changed in 2007 from 69
Qualified medical expenses can be divided into those
expenses you incur for yourself, your spouse, or for your dependants.
In general, some expenses qualify as a tax deduction and others a tax
credit. The tax treatments are quite confusing as some expenses are transferable
and others are not. There may be income tests that will reduce the tax
benefit available.
The tax savings are different for tax deductions versus
tax credit. A tax deduction will reduce your tax at the rate of your tax
bracket whereas a tax credit will reduce your tax at the lowest tax rate.
Therefore, for those whose taxable income is greater than $35,000 in 2004,
a tax deduction will save you more tax than a tax credit. Furthermore,
if you do not have any taxable income, a tax credit creates no tax savings.
In this article, we will focus on a general discussion
of the following:
1. Attendant Care Expenses Tax Deduction
2. Disability Tax Credit
3. Medical Expenses Tax Credit
4. Caregiver amount Tax Credit
Attendant Care Expenses are tax deductions subject to
an income test. These expenses are not transferable and can only be claimed
by the taxpayer if he/she also qualifies to claim the Disability Tax Credit.
The Disability Tax Credit is a tax credit and not a
tax deduction. It can be claimed by the taxpayer or transferred to qualified
relatives. If certain conditions are met, the taxpayer can claim the Disability
Tax Credit and, either the Attendant Care Expenses or the Medical Expenses
(up to a limit for an attendant).
Medical Expenses are a tax credit and not a tax deduction.
Expenses for the taxpayer and his/her family can be grouped together and
claimed by one person. Medical Expenses for any twelve-month period ending
in the taxation year can be claimed. The tax credit is subject to an income
test.
Caregiver amount is a tax credit that is available to
a person who has provided home care for a parent or grandparent (65 or
older), or to an infirm dependant (18 or older).
* CA PrimePlus Services
is a registered trademark of the Canadian Institute of Chartered Accountants.
Eldercare/CA PrimePlus Services is a customizable range of financial management
services for elderly and disabled persons.
Anne Chun, C.A. CFP is the principal of Anne Chun Professional Corporation,
providing financial, tax, estate and Eldercare services. She is also the
co-author of "Planning your Financial Future". Find out more
from her web site (www.annechun.ca).
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© , Fiscal Agents Money Management Newsletter
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