There is a little-known tax credit in Canada that lower-income earners can claim if they have paid medical expenses or disability support expenses in the last year. Namely the Refundable Medical Expense Supplement.
Getting to grips with all of the different tax credits and deductions you can claim can be tricky, and often many are missed, or simply assumed that you wouldn’t qualify. This is particularly true for lower-income households, so it is all the more important to take the time to check to see what you can claim.
The refund medical expense supplement is one of those that is often missed and often overlooked in favor of the medical expense and disability expense deductions. If you meet the eligibility criteria, however, you can claim for all three.
Let’s break down exactly what the refundable medical expense supplement is, what the eligibility criteria are, how much you could get, and how to claim.
Simply put, the Refundable Medical Expense Supplement is an amount that you can claim back as a tax credit in order to reduce your income tax.
What are the eligibility criteria for the refundable medical expense supplement?
There are a few criteria that you need to satisfy in order to qualify for claiming any of the tax credits, let alone the full amount.
In order to qualify you will need to:
- Be a resident in Canada for the whole of the previous year
- Be at least 18 years old by the end of the year
- Have an income from either an employer or be self-employed
- The total of the following two amounts is more than $3,751
- Your employment income on your tax return (line 10100 and 10400) minus the amounts on lines 20700 (RPP), 21200 (Annual union, professional or like dues), 22900 (Other employment expenses), and 23100 (Clergy residence deduction)
- Your net self-employed income (from lines 13500, 13700, 13900, 14100, and 143,00)
How much can you claim?
For 2021 you can claim up to a maximum of $1,285 or 25% of both your medical and disability expenses (whichever is the lower of these two amounts) for your refunded medical expense supplement. This amount is dependent on you hitting certain criteria, that we will go over below.
Unfortunately, working out whether you can claim the full amount, or how much you can claim is not particularly straightforward, but it is definitely worth doing in order to maximize your refunded medical expense supplement.
It is worth noting at this point that if your income is greater than $54,146 then you will not qualify for any refundable medical expense supplement.
How do I calculate how much I can claim?
While it might seem like if you hit the criteria above then you will qualify for the tax credit, there are also salary implications that affect the amount you can get and whether you get it at all.
If your income is less than $28,446 for the year (but over $3751 after deductions as above) then you will qualify for the full amount of tax credit. If, on the other hand, your income exceeds $28,446 a year then the credit will be reduced by 5% of your net income above that.
That may not be 100% clear so let us look at an example to help clarify how much you could claim:
You earn $20,000 a year before tax. After subtracting all the deductions stated in the eligibility criteria your final salary is $15,000.
In this instance, you would be able to claim the full amount of $1,285 as your income is above the $3,751 required but below the $28,446 threshold. The full amount of refundable medical expense supplement would then be deducted from the tax you owe, reducing your tax liability.
As another example:
Your salary is $35,000 before tax, and after deductions is $30,000. You meet the criteria for claiming the maximum, however, your income is greater than $28,446 for the year by $6,554 ($35,000 – $28,446) and so the amount you claim needs to be reduced by 5% of that difference. That calculation is:
$1,285 – $327.70 (5% of $6,554) = $957.30
So, the final amount of refundable medical expense you could claim would be $957.30.
The good news is that there are tax calculators that will work this out for your automatically but is important to understand the workings behind it in order to make sure you are maximizing your potential claims.
How to claim refundable medical expense supplement
Claiming is relatively simple once you have worked out how much you want to apply for.
You can make a claim for the refundable medical expense supplement on line 45200 of your tax return.
Remember, you can claim this supplement for the same medical expenses that you would claim on line 21500 and line 33200 of your tax return.