The canada revenue Agency is always improving and expanding the list of medical expenses for which Canadians can claim a tax credit. But thousands of people still may be missing out on the credit because they are unaware of what qualifies, or they think they don’t meet the minimum threshold at which they are able to make the claim.

Under the rules of the medi-cal expense tax credit program, an individual’s total out-of-pocket medical expenses must be more than 3% of taxable income or $1,884, whichever is less, to qualify for the credit. All medical expenses above these levels qualify for a 15.25% tax credit in 2006.

The CRA is constantly modifying the list of what qualifies to make it more inclusive, recently adding items as specific as voice-recognition software, Braille note-takers and oxygen concentrators. To view the detailed list, you and your clients can refer to CRA interpretation bulletin IT-519R2 at www.cra-arc.gc.ca/E/pub/tp/it519r2-consolid/it519r2-consolid-e.html.

“If you think it’s a medical expense, it probably is,” says Gena Katz, executive director, tax, at Ernst & Young LLP in Toronto.

Still, for clients seeking a tax break, you should do the homework before advising them to make a claim. Numerous cases disputing the eligibility of particular expenses have been brought before the Tax Court of Canada in recent years. The installation of hot tubs or hardwood flooring for alleged medical purposes were regularly disputed by the CRA until the 2005 federal budget specifically ruled them out.

“The provisions have been amended so that, in order to qualify a renovation, for instance, the changes must not be expected to increase the value of the home,” says Ariane Boyer, media relations officer for the CRA in Ottawa. “And they would not typically be incurred if the person making the claim were not suffering from an impairment.”

Eligible medical expenses include obvious items such as crutches, prescribed drugs, wheel-chairs, eyeglasses and contact lenses, but also apply to some lesser known devices and therapies, including:

> Air Conditioners: 50% of the cost of an air conditioner that has been prescribed by a medical practitioner for an individual with a severe chronic ailment (such as asthma), to a limit of $1,000.

> Vehicle Expenses: 20% of the costs to adapt a vehicle, as prescribed by a medical practitioner, to transport a person in a wheelchair, or the costs of a device that makes a vehicle wheelchair-accessible, to a limit of $5,000 (or $5,667 in Ontario).

> Mileage Costs: the costs of driving to and from a medical facility, provided the treatment is not available locally. The costs usually are calculated on a flat per-kilometre rate for the province in which the travel begins (on average, it is 48¢/km). Note that travel expenses incurred in driving to and from a medical facility for the purpose of visiting a patient are not eligible as medical expenses because they do not relate directly to treatment.

Nothing should be claimed without thorough documentation, including receipts, prescriptions and health insurance statements. Clients should hold on to all receipts in case the CRA requires them.

Either spouse can claim medical expenses for both spouses. Claimants should keep in mind, however, that the METC is a tax credit, which means it reduces the amount of taxes to be paid; it is not a tax deduction that reduces taxable income. Therefore, the claimant must have sufficient tax liability in order to benefit from the METC.

“If you have someone with a low income who doesn’t owe any taxes, the medical expense tax credit isn’t useful in his or her hands,” says Katz. “In some cases, it’s the higher earner that stands to benefit.”

Claiming a medical expense on behalf of a dependent is also permitted, a provision that is particularly relevant to clients who are covering nursing-home costs for an elderly parent or in-law. The claimant is limited to expenses greater than 3% of the dependent’s net income, up to $10,000.

Finally, the CRA will allow your clients to pick any 12-month period ending in the tax year that the medical expenses were incurred. For example, if your client had significant expenses in March 2005 and January 2006 and didn’t make a claim for the 2005 tax year, the expenses could be claimed on his or 2006 tax return for March 2005-March 2006.

@page_break@In the year of a taxpayer’s death, the CRA permits claims for a 24-month period. IE