fellow canadians - braces and the tax man

[Kodius Champion]

You mean even the jaw surgery won't be covered? Is it because they judge it is not medically necessary?

Oh, it's medically necessary. Luckily, the surgery is covered by provincial medicare. It's my own insurance that won't pay for a thing.

[PIMPmyTEETH]

hippyhippo, you're right. the 1844 is subtracted from your total expenses and then your credit is calculated on whatever is left over.

and, yes, the medical expenses claimed have to have been paid within a 12 month period ending in the current tax year. and, you can't carry anything over to the next year.

[lilsisbet]

I think perhaps the reason why not a lot of people have looked into this could be that most of us who get braces have health insurance through our work our through a member of our family's work.

I think for a lot of people (including me) it would be unthinkable to spend thousands on braces without them being covered by some kind of insurance.

For the record..... the $5400 is out of my pocket. Our insurance at work stops at age 18 for any Orthodontic work. Consider yourself lucky.

And Hippyhippo is correct. The medical bills all have to be claimed in the same year - no carrying over. When tax time comes.... look into it, for me it was very useful.

[Kodius Champion]

But I also was under the impression that all of these expenses had to be paid within a 12 month period. So if you're on a payment plan with your ortho over multiple years, the medical expenses you can claim on your taxes for each year may be much lower.

I am, of course, going to check this out officially over the next couple of months, but I want to run this by everyone just for my own info:

My total ortho costs will be $8100. I paid $1500 as a 'down payment' when I started in April, and will be paying the rest, monthly, over 24 months.

Therefore, I should be claiming ($1500+all monthly payments to December) - $1844 on my taxes in March, correct?

[lilsisbet]

That is what I did Kodius. I paid $1105.00 as a downpayment and and $175.00 per month (starting in April) for a total of $2680 for 2005. I can't remember what the limit was for Revenue Canada - but it worked out in my favour.

For 2006... I am going to claim all of my monthly payments for 2006. As I have two payments left in 2007, I am going to pay the Ortho off in December so I can use the last two payments towards my 2006 medical expenses (I hope that makes sense)

[itsjustme]

great thread. thanks for all the info, it will be nice to be able to get some money back.

[Kodius Champion]

Thanks, all!

I poked around the Revenue Canada site (http://www.cra-arc.gc.ca/menu-e.html) today and found the following:

"You can claim medical expenses paid in any 12-month period ending in 2005 and not claimed in 2004. Generally, you can claim all amouts paid, even if they were not paid in Canada.

Your total expenses have to be more than the lesser of:

3% of your net income (line 236); or $1,844. "


I also found this, which applies to me because I have to drive 45 minutes to my ortho:

"If medical treatment is not available locally, you may be able to claim the cost of travelling to get the treatment somewhere else. If you are claiming travel expenses to get medical treatment, you can choose to use a detailed method or a simple method for calculating your travel expenses.

Meal Expenses
Simple Method – You can claim a flat rate of $15 a meal to a maximum of $45 per day, per person, without receipts.

Detailed Method – To claim your meal expenses, you have to keep your receipts.

Vehicle Expenses
Simple Method – You do not have to keep receipts. Keep track of the kilometres you travel for medical reasons during a 12-month period. To make a claim you must multiply the number of kilometres by the flat rate per kilometre for the province or territory in which the travel begins. For more information, see Meal and vehicle rates used to calculate travel expense for 2005.

Detailed Method – You have to keep your receipts and records for vehicle expenses you paid for a 12-month period for medical reasons. You have to keep track of the total number of kilometres you drove during that period, as well as the number of kilometres you drove specifically for the purpose of medical reasons. Your claim for vehicle expenses is the percentage of your total vehicle expenses that relate to the kilometres driven for medical reasons. For example, if you drove 10,000 kilometres during a year, and you drove 1,000 kilometres for medical reasons, then 10% of your vehicle expenses can be claimed for travel expenses.

Vehicle expenses include: Operating expenses such as fuel, oil, tires, licence fees, insurance, maintenance and repair, as well as ownership expenses such as depreciation, provincial tax, and finance charges."

[redsfn77]

You're in luck, the US allows itemized deductions for medical and dental expenses over 7.5% of your adjusted gross income. Here is an example.

$5,000 For the brace
-$1,000 from insurance
=$4,000 Qualified Medical Expenses Paid
- $1,000 (7.5% of AGI of $13,333)
=$3,000 Deductible Medical Expenses (On Schedule A of 1040)

*Note that this can only be deducted if you itemize. If you take the standard deduction, you deduct nothing.

I am an accountant so I hope this helps. Maybe this will make you feel even better about your braces. Getting a great smile and getting money back to do it is a win-win.

22 days since I was braces

[finally]

redsfn77, does that apply if you're on a payment plan? My treatment is:
$3954
-1000 insurance
$2954 my share of the cost.

I'm paying $123/mth starting December. What can I write off if anything? Standard deduction might work better for me.

I'm in the U.S.

[redsfn77]

Finally,

For this year, standard deduction will more than likely be your best bet. Medical expenses are deductible for the period actually paid, so your amount for this year is the $123 for December. If you would have charged it for some reason, the whole amount of $2954 would be applied toward the deduction after you take away 7.5% of your AGI. I hope this helps.

22 days since braces went on

[redsfn77]

By all means, if your itemized deductions are more than the standard deduction (mine always is due to home mortgage interest, charity, and student loan interest), then you definately want to take the higher of the two to reduce your taxable income, you just would not be able to add dental expenses due to the amount being so low. Let me know if I can help or confuse you further . Have a good weekend!!

[finally]

Hmm, my student loan interest is minimal and I don't have a mortgage so it most definitely would be in my best interest to do the standard. Maybe I could use itemized next year.

Thanks for the information! Are you a tax accountant? Tax season is near...

[redsfn77]

LOL. Unfortuneately/Thankfully (however you want to look at it), I am not a tax accountant (I audit financial statements for SEC Registrants), but for the CPA Exam you have to know a little about a lot, so hence I have a good understanding of the tax code. It also doesn't hurt that my mother-in-law works for the IRS who does mostly business returns, but knows WAY more than any tax accountant in my firm. We only started to itemize when we bought our house. My student loan interest is only about 400 a year, but that home mortgage interest is nice to claim. Let me know if you ever have any questions. I am the resident financial expert of my friends and family and have no problems answering other questions. Have a good weekend.

23 days since braces went on

[Natasha_26]

Hi,

I claimed my orthodontic bills as a medical expense and had no problems with revenue canada.