Taxpayers should be aware that they won't receive a refund of any of the health care spending expenses they've paid out, but can receive a credit, which may lower the amount of taxes and allow taxpayers to keep more of their hard-earned money. It's never too soon to begin planning for income tax time and ways to lower your tax obligation. Health spending accounts can help reduce your tax burden, but it's important to understand how they can work in your benefit. Taxpayers should be aware that they won't receive a refund of any of the healthcare expenses they've paid out, but they can receive a credit, which will ultimately lower the amount of taxes paid and allow taxpayers to keep more of their hard-earned money. It's up to the individual taxpayer to monitor their healthcare expenses so they can receive a better tax return.
Before residents attempt to claim any part of their healthcare coverage for a credit, it's important to have their receipts in order. Taxpayers are required to provide proof of the money they spent to receive a credit. If you can claim the credit, the amount spent has to exceed 3 percent of your taxable income. Taxpayers can choose any 12-month period ending in the tax year to claim the credit. Depending on which months are chosen, it may make other expenditures ineligible if they fall outside of your target months.
Taxpayers should also be aware that if they were reimbursed for a medical expense, they can't claim it as a credit. If you need medical procedures, equipment or medications, it would be a good idea to spend the money for them before tax time if the cost will help you reach the 3 percent limit. See: www.CHSA.ca
There are three specific tax credits that residents can take advantage of at tax time. The first is the disability tax credit. It was designed for those with a medical condition that prevents them from working. The disability must be expected to last 12 months or longer. Those claiming the credit must have a disability that prevents them from working and limits their day-to-day activities.
Credit is available for general medical expenses, but the money has to have been spent during the past 12 months. Again, if the taxpayer was reimbursed for the expense, it can't be claimed as a credit. The applicable period to claim medical expenses for those who are deceased is 24 months.
There's a wide range of medical devices that qualify for a tax credit, from dentures and hearing aids to oxygen tents and wheelchairs. The cost of maintenance on any qualifying device can be claimed, as well as expenses incurred for a Seeing Eye dog and similar animals.
Many changes, additions and renovations to your home can also be claimed for a credit if they were needed for you to function within your home, or gain access to it, such as wheelchair ramps. If lessons in lip reading, sign language, Braille and interpreter's services were needed, those also qualify. Even preventative measures qualify for a tax credit. Taxpayers should be aware that some expenses in this category require very specific documentation to claim them.
The rules governing tax credits appear contradictory in many instances, leading to a significant amount of confusion as to what qualifies for a tax credit and what doesn't. Each taxpayer should meet with a professional tax preparer if they believe they may be eligible for a healthcare-related tax credit.
There are credits available and many residents qualify for them, even if they don't know it. Even if you don't ultimately qualify for a credit, there's no reason not to provide receipts and other documentation so your tax preparer can make that decision based on tax law. He or she may even be able to locate credits to which you're entitled of which you weren't aware. It's your obligation to provide what's needed to get a better tax return. No one is just going to give it to you.
For more information, visit the website at www.CHSA.ca.
We demonstrate exactly how all Canadian Tax Payers can benefit from the additional tax savings. We answer all your questions on Health Spending Accounts (HSAs) - including Health & Welfare Trusts (HWTs), and Personal Health Spending Plans (PHSPs)