Medical tax credits and you

This week (March 1) saw the start of a new system of tax credits for medical expenses. The system partly replaces the current tax deductions for medical expenses.

The table (see the link at the bottom of this page) outlines the tax deductions you enjoyed until February 29, the tax credits that came into effect for some taxpayers this past week following amendments to the Income Tax Act last year and the proposed extension of the tax credit system in 2014, should the proposals released last month with the Budget be enacted later this year.

Deductions reduce your taxable income, whereas tax credits are a rebate on the tax you owe.

In the case of disabled taxpayers or those who have a disabled dependant, a disability is defined as a moderate to severe limitation of your ability to function or perform daily activities as a result of a physical, sensory, communicative, intellectual or mental impairment. The disability must be diagnosed by a registered practitioner and have lasted or be expected to last more than a year.

Medical expenses that you have paid out of your own pocket and have not recouped from your medical scheme must be qualifying ones as defined in the Income Tax Act – typically those paid to registered medical practitioners and hospitals, or for medicines dispensed by a registered practitioner or pharmacist.

Your taxable income is your income less any exempt income and deductions, plus your taxable capital gains and taxable allowances. For the purposes of the medical deductions, it also excludes retirement fund lump sum and retirement fund lump sum withdrawal benefits.

Table: change to tax credits for medical expenses


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