Income Tax Time – Medical Expense Tax CreditIan Whiting
This is another area where I too often see mistakes that have been made in the past. For some reason, many people and tax preparers only pay attention to the current tax year date – but this can be a costly error. You are allowed to use any 12 month period that ends in the current taxation year and this can be important if you have some big-ticket items in the early part of one year that you can couple with some other significant costs from the latter part of the previous year.
As most people know, there is a threshold below which, no tax-credit is created. That threshold is 3% of line 236 of your tax return. For those who choose not to memorise lines on your return, that is your NET INCOME and it can be found about half-way down page 3 of a regular T1 Tax Return. Once allowable expenses exceed the 3% of line 236, a credit is automatically created.
So what can you do besides check for straddling of expenses across two calendar years? Look for DEDUCTIONS – and maximise them to the greatest extent possible on your cash flow. Items such as RRSP or SPOUSAL RRSP contributions reduce your NET INCOME. So do Business investment Losses and allowable moving expenses.
It can be handy to track your expenses on a computer spreadsheet that includes the date and then you have the necessary information at your fingertips when it comes time to prepare your own return or pass the spreadsheet to the firm who does it on your behalf. CRA won’t check if a straddle works in your favour – since you have the information.
Don’t let $$ slide through your fingers.