Nearly Last-Minute Tax Tips and Maximizing Claims for Medical Expenses

The eligibility for the Disability Tax Credit (DTC) have been expanded to include a more modern list of mental functions required for everyday life, a broader list of activities defining life-sustaining therapy and reducing the required frequency of therapy.

Remember that if a medical condition significantly impairs your ability to walk, see, hear, feed or dress yourself, control your elimination functions or forces you to engage in life-sustaining therapies, you may qualify for the DTC, with about $1500 per year of reduce taxes. This is a credit that can also be transferred from a dependent, if that taxpayer does not need the full credit to reduce taxes to zero.

As in 2020, work from home expenses may be claimed if pandemic closures at your workplace caused you to work from home. The maximum claim has been increased to $500, based on two dollars per day for each day worked at home. To qualify, you must have worked at least 50% from home for at least four consecutive weeks ending in the year, and you must provide a form T777 or T777S.

People who repaid some of their COVID-19 Government benefits last year can choose the year in which to deduct the repayment amount.

Note that one-time provincial COVID-19 assistance payments were generally not taxable.

For educators, the eligible school supply tax credit has been increased to $250 from the 2020 limit of $150.

The Northern Residents Deduction travel component has now been made available to residents with no employer benefits.

Postdoctoral fellowship income now qualifies as “earned income” for RRSP limit calculation purposes. Taxpayers can adjust up to 10 years in reverse to create RRSP room, adding 18% of such income.

Although not new this year, the special rules regarding claims for medical expenses justify a review.

Medical expenses are one of the few claims that do not have to coincide with the calendar year. Taxpayers can claim all expenses that they incurred in any 12-month period ending in the tax year.

For example, if you incurred significant medical expenses from May 2020 through to May 2021, you can claim all of those expenses (but only those expenses) on your 2021 tax return.

This is significant because you can only claim expenses that exceed the lesser of $2,431 or 3% of the claimant’s net income.

Spouses and common-law partners can combine their claims to help exceed that threshold. It is usually best for the lower income spouse to make the full claim, because the 3% of net income threshold is lower. If possible, planning any flexible expenses (like dental treatments) all within a 12-month period helps maximize the tax credit.

Also significant is that claims can be made for dependent children, and even for financially dependent parents, brothers and sisters, nieces and nephews and uncles and aunts who are resident in Canada. The key is that those people must be dependents.

The list of eligible expenses is very long, and worth researching on the CRA website. Expenses do not have to be incurred in Canada to be eligible.

As with everything else, consult with your tax preparer, research carefully or even hire an expert to make sure you’ve maximized your credits and deductions.

Happy filing!

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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

Please consult legal, tax, insurance and investment experts for advice on your unique situation.

David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FP Canada™ Fellow (FCFP) Distinction, and repeatedly named a Top 50 Financial Advisor in Canada.  He is a Senior Wealth Advisor and Portfolio Manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.