Navigating Medical Expenses from a Tax Perspective

Dealing with unforeseen medical complications can be stressful. This stress is only compounded when trying to determine the best way to claim your medical expenses for tax purposes. If you have ever felt overwhelmed, you are not alone. Here is an overview and a few strategies to help you navigate your medical expenses in the complex world of tax.

There are many types of medical expenses, and determining eligibility is usually the first step. Luckily, the Canada Revenue Agency’s (CRA’s) website has an extensive list that covers a range of eligible expenses.

The site can be found here.

While the CRA’s list may not be complete, and it is possible that there are things not on their list that can be claimed, this is a good place to start. In more general terms, eligible expenses usually include costs paid out of pocket to a medical practitioner, dentist, nurse, licensed private hospital, etc. Your costs can be incurred in Canada or abroad. For example, if you have travelled to get medical treatment abroad, you don’t need to worry. Those medical expenses may still be eligible.

Common medical expenses include prescription medications. Note that most over-the-counter medications, supplements, vitamins, and homeopathic treatments do not qualify.

You can only claim medical expenses for your family members that you, your spouse, or common-law partner paid during any 12-month period ending in the tax year being filed for in which no claim has already been made. If you are submitting a claim for family members other than yourself, your spouse, or your common-law partner, they must generally qualify as dependents. Dependents are often defined as individuals for whom you provide basic needs such as food, shelter, and clothing. Typically, this category includes children under age 18. However, in some circumstances, it may also extend to older children, parents, grandparents, siblings, and other closely-related family members.

The CRA only allows claims for out-of-pocket costs. So, if you have been reimbursed or an insurance policy covers part of the costs, that amount can’t be claimed. In some cases, an employer may include a
reimbursement as a taxable benefit, meaning they reported it on your T4 slip and you paid personal tax on the amount reimbursed. If that is the case, you may still be able to make a claim, since you have ultimately borne the cost of the expense.

At this point, you may be thinking that this sounds like a headache. What is the benefit of claiming the expense? Well, claiming medical expenses can result in a combined federal and BC provincial nonrefundable¹ of about 20%² on your medical expense claim. Well worth the effort if you have significant out-of-pocket costs. Here are some ways to maximize your tax credit:

1. Generally, you will want to claim the medical expenses on the lower income spouse or common-law
partner’s tax return. Why? The CRA has a mechanism that allows only a portion of the medical expenses above a certain threshold. The federal threshold is calculated as the lesser of 3% of net income or $2,834 in 2025 (this amount is indexed). For example, a family has total medical expenses of $10,000. The lower-income spouse has a net income of $50,000 and the higher income spouse has a net income of $150,000. The federal tax credit would be calculated as follows:

Lower-income spouse: The threshold would be the lesser of $2,834 or 3% of net income, which is $1,500. The tax credit would be calculated on medical expenses of $8,500, resulting in federal tax
savings of approximately $1,275.

Higher-income spouse: The threshold would be the lesser of $2,834 or 3% of net income, which is $2,834. The tax credit would be calculated on medical expenses of $7,166, resulting in federal tax savings of approximately $1,075. By making the claim in the lower income spouse’s return, there are greater federal tax savings, approximately $200 in this example. There is a similar calculation for the provincial tax credit.

2. Since you may use any 12-month period as long as it ends in the tax year being reported, careful timing matters. Use a 12-month period when most of the medical expenses were incurred to maximize the credit. Similarly, since these claims result in a non-refundable tax credit it may be better to wait for a year when you owe taxes otherwise the credit is lost.

3. Business owners should consider using a Private Health Services Plan (“PHSP”). If used correctly medical expenses can be deducted by your company, which can result in greater tax savings than could be achieved by claiming the amounts personally.

4. Premiums paid for a medical insurance policy can be claimed as a medical expense. It may be worth
talking to your financial or insurance advisor about getting private health insurance.

CRA audits are a fact of life and medical expenses are often a target. It is highly advisable to keep all
of your receipts³ and proof of payments to support your claim. Failure to provide these upon request could result in the CRA denying part or all of your claim.

Individuals with prolonged or severe impairments in their physical or mental functions may be eligible for the Disability Tax Credit (“DTC”) for further tax savings⁴. Individuals you may not typically think would qualify may be eligible. Some common examples would be individuals diagnosed with ADHD, dyslexia,
or autism. If you think someone in your family may qualify, discuss this with your accountant.

A medical practitioner will need to complete a DTC certificate, which can be submitted to the CRA
by yourself or your accountant. If you haven’t made a claim in the past, but your medical practitioner
has confirmed the disability for prior years, you may request in the application for the CRA to automatically apply the DTC retroactively toward all applicable years, even if your personal tax
return has been filed and assessed.

As I’ve touched on, the rules surrounding medical expenses can be complex. To maximize your claim, it is vital to consider many factors.

If you are uncertain, it is important to discuss your unique situation with your accountant so they can come up with a customized plan for you and your family. Horizon Chartered Professional Accountants
Ltd. can help you navigate these complex rules and many others. We specialize in providing tax advice for individuals and private companies that allows our clients to thrive and prosper here in Canada. We welcome a chance to meet with you and provide you with the tools to grow your personal wealth and business. ■

1 Non-refundable tax credits reduce taxes payable. However, they can’t generate a tax refund.
2 Federal non-refundable tax rate15% and BC a non-refundable provincial tax credit of 5.06% during 2025.
3 These should clearly show the amount and date the expense was incurred, the name of the patient, a description of the services or devices provided, the name of the person who made the payment, and similar information.
4 Depending on your situation, the federal non-refundable tax credit can range from $10,138 to $16,052 per year in 2025 resulting in potential federal tax savings of approximately $1,500 to $2,400.

The views expressed are those of the author and not necessarily those of RGF Integrated Wealth Management, which makes no representations as to their completeness or accuracy.