Personal Tax Credits and Medical Expenses
Tax Credit claims reduce the tax paid by families and persons they support with disabilities, infirmities, handicaps or impairment…
©Copyright 2007 Eileen Reppenhagen
As you approach the 2007 tax filing season, families who support persons with disabilities, as well as those persons should be aware of the brand new (yes, this year it’s green) RC4064 Medical and Disability-Related Information Guide released in early January 2008. The new guide is now available online and for multiple copies, I recommend free delivery provided through online ordering. This guide is the result of consultation with the Disability Advisory Committee which continues to meet informally with CRA staff every month by teleconference.
An important new development in 2008 will be the introduction of the Registered Disability Savings Plan (RDSP). CRA say you can expect to see more information, booklets, guides and forms during 2008, but probably not until December, 2008. An important part of the process will be documenting competence or incompetence to manage the affairs of the person with the disability because this person may be placed as the joint or even sole trustee of their RDSP. PLAN will be invaluable in assisting families with this process. If you don’t have an affiliation with PLAN it may be something you want to check out in 2008.
There are several other places to look for information about tax credits. One is the TD1, which lists most of the credits, and along with the T1213 is a way to reduce the tax withheld at source so you can afford to pay your bills during the year if you qualify for any of the credits listed on that form. The T1213 must be pre-approved by CRA. Another source of information is the General Tax Guide and a third is an Interpretation Bulletin, IT 513 Personal Tax Credits, which discusses support and what that means in the Appendix.
All of these are posted and searchable by their form number on the Canada Revenue Agency website. There are also more website links at the end of this article.
If your T4 for this year has Box 85 completed, that amount is a medical expense you can claim on either you or your spouse’s or partner’s tax return. It is the premium on your extended health and dental plan paid by you, the employee from your net pay. This year Box 85 is again optional because there is opposition from payroll preparers to completing this box. If you know that you paid premiums through your payroll department and this box is not completed, ask to have it completed or for a letter so you can claim these premiums as a medical expense.
Canada Revenue Agency website lists medical expenses for all of the various medical expenses listed in the Income Tax Act in S. 118.2(2) and those under Regulation 5700 in both the RC4064 and on their website under “M”. Medical expenses for glasses, dental, chiropractor, those are for everyone. Only four of the medical expenses require that you have been labeled as disabled or infirm. Most require a prescription or certification by a qualified practitioner. The challenge may be that in your province or territory there is no licensing for some practitioners. A list of who is licensed and licensing province/territory is not available to the public.
Link through Individuals and down into Life Events and from there to Persons with Disabilities because there is much more than I can write about here.
The challenge when it comes to medical expenses claims is to document claims for complex items like medical travel or therapy where you require four different things, the disability tax credit, a prescription, someone who is qualified to administer the therapy and the receipt for the purchase of the therapy.
The employment links below will generate discussion as this is a very uncomfortable topic in Canada because we are challenged by a huge underground economy, especially in the caregiver area. The liability to families if there is an accident or injury could be enormous. WCB takes no prisoners and your house insurance coverage may not be effective if you have not been complying with payroll and also notifying them that you have employees in your home or out with your charges. Canada Revenue Agency Payroll and the Province/Territory employment standards require compliance with a variety of complex regulations. To protect yourself and your assets, you may need to hire an accountant. Contact the CGA Association for a list of qualified accountants in your area.
The potential liability for boards who do not comply with the requirement to issue T5007’s (See the T4115 T5007 Guide – Return of Benefits) is potentially crippling to the organization they work to support. Social assistance reporting is an important responsibility of non-profit organizations and their boards if they fund families to hire caregivers.
A T5007 is required to be prepared for funding provided by non profits or government for respite or attendant care for employees paid as a medical expense under S. 118.2(2) (b.1).
Attendant care may be claimed as a medical expense to offset the income where the patient is certified as disabled and SIN # recorded with T4 issued to caregiver or invoice received from a legitimate business. Creating an invoice for the caregiver and deeming them as contract labor can backfire.
More reading materials:
TD1 and T1213
Travel expenses for Medical Expense and Travel (meal and vehicle) rates
IT 513 Personal Tax Credits
RC 4110 Employee or self-employed