A Little-Known Tax Bonus for Medical Expenses

Evelyn Jacks

The Refundable Medical Expense Supplement is a tax credit claimed on line 45200 of the T1 return targeted at lower income earners.  If the credit exceeds the taxes payable, the balance will be refunded to the taxpayer. CRA provides an area on the Federal Worksheet that accompanies the income tax package to make the calculations. The trouble is, few people know about it.

To be eligible for the credit, the taxpayer must be:

  • A resident of Canada throughout the year (or if deceased, throughout the portion of the year prior to death)
  • At least 18 years old by the end of the year, and there is no rule precluding two spouses from both claiming the credit as long as they each have medical expenses and otherwise qualify
  • Have income from employment (not counting wage loss replacement plan benefits but including amounts received under the Wage Earner Protection Plan Act (WEPP)) or self-employment

Notably these earned income requirements often cancel out claims for seniors on passive pension incomes.

So exactly how much is it?  That’s not so simple.  First, to qualify, taxpayers must have earned at least $3,714.  For 2020 the maximum claim is $1,272. However, the credit is reduced by 5% of the taxpayer's net income in excess of $28,164.  This is also compared to the sum of

  • 25/15 of the medical expense credit (which is equivalent to 25% of the medical expenses on which the medical expense credit is calculated) and
  • 25% of the Disability Supports Deduction.

The lesser of those two amounts are claimed.  Thankfully, tax software calculates this for the taxpayer. 

Another good idea: see a DFA-Tax Services Specialist™ for help in this important year when medical expenses, disability tax credits and various claims for dependants and their caregivers may be first-time realities for tax filers.