Canadians, you’re missing out. There’s a tax break that pretty much every single person can deduct from taxes. And yet, it’s something that most of us don’t even consider. What’s more, it’s something that even accountants might miss, unless you bring it up!
So, let’s get into this tax break offered by the Canada Revenue Agency (CRA) and how to turn it into more money for 2024.
The tax break
When it comes to tax breaks, there is one item that many of us miss, and that’s the health of ourselves and our dependants. Now, I’m not necessarily talking about serious health conditions. These are likely to come up when it comes to your taxes. However, I am talking about more everyday concerns.
This comes from the Medical Expense Tax Credit. This credit reduces your taxes owed based on eligible medical expenses you incurred for yourself, spouse, common-law partner, or dependent child under 18. And it can add up to quite a lot.
The types of expenses vary, including prescription medications, medical devices not covered by insurance, fees for ambulance services, treatments for mental or physical disabilities, laser eye surgery, and even weight loss surgery! I’ve considered air purifiers for my kids who have asthma, and relatives have claimed celiac disease expenses as well.
To claim, the expenses must have occurred during the 12-month period ending in the current tax year. The expenses also cannot have been claimed in a previous tax year. Furthermore, it cannot be claimed by insurance, and you must have all receipts.
There’s (of course) a catch
The main catch here is that you can only claim medical expenses that exceed the greater of the 2024 fixed amount of $2,759, or 3% of your net income. This would be the line reported on line 23,600 of your tax return.
So, if you have net income of $50,000, 3% of that net income is $1,500. You, therefore, can claim the $2,759, as it’s greater than the $1,500. If your medical expenses reach $3,000, that means you’ll only end up paying $241 out of pocket!
Consider using that credit
Now, let’s say you receive that full $2,759 in credit for your taxes. You’ve already paid for your medical expenses, so it might be prudent to consider investing it for your future rather than spending it right away. That is, unless you have debts! Beyond mortgages, high-interest loans should always be paid off first.
Yet if you can, consider popping that $2,759 right back into your Tax-Free Savings Account (TFSA) and invest in a growing stock with a dividend. One to consider is Royal Bank of Canada (TSX:RY). This bank stock is the largest of the Canadian banks and only getting bigger thanks to its acquisition of HSBC Canada.
It’s also been performing the best, with shares back near 52-week highs. All while providing a dividend yield 4.05%. This is paid out quarterly and can be used to reinvest right back into your stock. And with shares up 6%, that could certainly occur in the next year as well. So, now, you’ve turned that initial payment for expenses into an investment, creating serious money for 2024.
