Download Claiming Orthodontics Medical Expense

®
_______________________________________________________________________________________
Claiming Orthodontics
as a
Medical Expense
This strategy will help you maximize your tax savings from claiming
orthodontics payments as a Medical Expense on your tax return.
_______________________________________________________________________________________
Most orthodontists allow their patients to make
monthly payments for services over the period of
time that the service occurs, which is often more
than one year.
The Canada Income Tax Act allows claims for
payments to orthodontists to be included as
Medical Expenses on tax returns.
You can claim medical expenses paid in any 12month period ending in the tax year which you did
not claim on your prior year's tax return. Your total
expenses need to be more than either 3% of your
net income (line 236) or $2,109 (for year 2012),
whichever is less.
would qualify as a medical expense on your tax
return for the current year. Or if you receive
service in December of the current year yet make
payment in January the following year, the medical
expense claim must wait until the following year's
tax return.
The following example may or may not be
applicable to your personal situation, depending on
your taxable income and total tax credits.
An Orthodontics Example
The Usual Way: Chris began paying $200 per
In other words, there is a "deductible" against your
medical expense claim each year. The deductible
amount is the lower of 3% of your net income or
$2,109 (if your net income is greater than $70,300
for 2012).
month for orthodontics beginning July 2012, with
payments scheduled over 20 months until February
2014. Because the payments are made over more
than a 365 day (12 month) period, Chris cannot
claim the sum of all payments as a Medical
Expense on a single year's tax return.
Your medical expense claim is based on the date of
payment and not the date of service. If you pay a
medical expense in December of the current year,
yet receive the service in January, the payment
The payments made from July 2012 until June
2013 can be claimed on Chris's 2013 tax return,
and the payments from July 2013 until February
2014 can be claimed on the 2014 tax return.
_______________________________________________________________________________________
Abbington Tax & Estate Services Inc., 662 Upper James Street, Hamilton, Ontario, L9C 2Z3
Tel: 905-389-3534
Fax: 905-389-0345
Web: www.abbington.ca
®
_______________________________________________________________________________________
Therefore Chris will need to twice reduce the claim
by 3% of net income (once on each year's tax
return). If Chris's net income is $50,000, then 3%
of net income equals $1,500. The combined
Federal and Ontario Medical Expense tax savings
rate is about 20%. So for Chris the total tax
savings over two year's tax returns will be only
$200, as shown here:
Tax year
2013
2014
Payments
$ 200
x 12
$2,400
$ 200
x
8
$1,600
Minus 3%
of Net Income
Leaves
Tax savings rate
Tax savings
1,500
1,500
$ 900
$ 100
x 20%
x 20%
$ 180 plus $ 20 .
The Better Way: Chris should make all
orthodontic payments within a 365 day period in
order to claim all payments on a single year's
tax return. Better still, if Chris makes all
payments before Dec. 31, 2012, then the full claim
could be made on the 2012 tax return rather than
waiting until the 2013 return.
Chris would achieve tax savings of $500, which is
$300 more than the usual way.
consider your reimbursement to be for the first
payments made to the orthodontist. You will be
able to claim only the subsequent surplus "out of
pocket" payments on your tax return.
When your orthodontist asks if you will make
accelerated payments, now you know this may be
to your benefit.
Payment for orthodontic services is just one of
many eligible Medical Expenses. If you have a
choice, you should plan to pay as many of your
medical expenses as possible within the same 365
day period to maximize your tax savings.
Please contact Abbington Tax & Estate Services
Inc. to schedule an appointment for us to prepare
your income tax return. We also offer to review
your previously filed tax returns for possible
adjustments to improve your tax savings.
Now you know what it means to…
… Keep More of Your Money!
_________________________________________
We are available throughout the year
to serve you better.
We always check to make the best claims for…
RRSP Deductions
Child Care Expenses
Net Capital Losses
Pension Splitting
Medical Expenses
Disability Amount Transfer
Tuition & Education Amount Transfer
Ontario Tax Reduction
Charitable Donations
… and more!
One Tax Return (either 2012 or 2013)
Total Payments
Minus 3% of Net Income
Leaves
Tax Savings Rate
Tax Savings
$4,000
1,500
$2,500
x 20%
$ 500 !
Note: If you receive a reimbursement under your
employer's group health & dental insurance
benefits, then the Canada Revenue Agency will
This is just part of our excellent service to you!
_______________________________________________________________________________________
Abbington Tax & Estate Services Inc., 662 Upper James Street, Hamilton, Ontario, L9C 2Z3
Tel: 905-389-3534
Fax: 905-389-0345
Web: www.abbington.ca