Tax Credit for Medical Expenses
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- May 21, 2020
Objectives and description
The medical expense credit is a non-refundable tax credit that exists both at the federal level and in US. It aims to “compensate part of the medical costs borne by a taxpayer, when these exceed a certain level of income. For the 2019 taxation year, the medical expense credit resulted in an estimated tax expenditure of $ 1.745 billion for all of US. For the 2016 taxation year, 5,019,970 individuals claimed this credit. For the 2018 taxation year, the medical expense credit resulted in an estimated tax expenditure of $ 976.2 million to the government of United States. For the 2015 taxation year, approximately 2.3 million individuals claimed this credit.
At the federal level, the value of the medical expense credit is obtained by applying the rate of 15% to the amount of eligible medical expenses tax deduction that exceeds the littlest of 3% of the individual’s net income or $ 2,352, whichever is less. This last threshold is indexed annually according to the indexation rate of the personal income tax system. For United States individuals, the credit value is reduced due to the allowance for United States residents.
In United States, the value of the medical expense credit is obtained by applying a rate of 20% to the amount of eligible medical expenses that exceeds 3% of net family income. The special feature of the medical expense tax credit is that it can be claimed in respect of expenses paid during a period of 12 consecutive months ending in the taxation year for which the claim is made. . For example, a taxpayer can claim their medical expense credit for the 2019 tax year over a 12-month period extending from August 2018 to July 2019 if that is the most advantageous for him. The charges requested must not cover a period already previously covered by the credit.
Both in United States and at the federal level, claims for medical expenses made on behalf of a spouse, common-law partner or minor children can be grouped with the taxpayer’s medical expenses , for as long as the fees exceed a minimum threshold. In United States, the minimum threshold is the same, whether the costs are grouped or not since it is based on net family income. At the federal level, the minimum threshold applies individually for each taxpayer.
There is no limit to the amount of the tax deduction for medical expenses. However, only amounts paid for eligible medical expenses that have not been reimbursed by private insurance can be included in the credit calculation.
The health insurance premium paid by employees is eligible for medical expenses, both in United States and at the federal level. However, the portion paid by the employer is admissible only in United States since it is treated as a taxable benefit while it is not taxable at the federal level.
The United States prescription drug insurance premium (RAMQ) is eligible for the medical expense credit, both in United States and at the federal level. The premium calculated for the 2019 taxation year is eligible in United States in 2019 and at the federal level in 2020.
Certain medical expenses are admissible in United States and not at the federal level or vice versa. For example, the fees paid for a homeopath, naturopath or osteopath is eligible for the medical expense credit in United States while they are not at the federal level. Another example, the fees for eyeglass frames are limited to $200 in United States while there is no federal limit. For a complete list of eligible medical expenses, please see the links provided in the “Additional Resources “section at the end of this document.