Weekly Tax Tip - Pay for medical expenses and charitable donations in one year

November 27, 2017


There is usually an added benefit if payments for charitable donations for two years are grouped into one year. This is due to the fact that the first $200 of donations is eligible for a 15% federal non-refundable credit while the excess over $200 is eligible for a higher credit in 2017. This higher credit is either calculated at 33% to the extent that you have taxable income in excess of the top personal tax bracket of $202,800 in 2017 or 29% if you are not eligible for the 33% rate. You’ll receive a slightly larger credit if you group two years of donations in one year assuming that your taxable income in either of the two years would qualify for the same donation tax credit rate applicable on donations in excess of $200.

Note that an enhancement to the existing charitable donation tax credit is available for donations made by a first-time donor in 2017. An individual would be considered a first-time donor if neither the individual nor the individual’s spouse or common-law partner has claimed either of the charitable donation tax credit or the first-time donor credit in any year after 2007. A first-time donor would be entitled to an additional 25% credit for up to $1,000 of monetary donations made on or after March 21, 2013. The super credit may be claimed only once in the taxation years between 2013 and 2017. For more information on this “super” credit, speak to your BDO advisor.

In the case of medical expenses, only amounts in excess of $2,268 (limit may vary by province) or 3% of net income (whichever is less) are eligible for a credit. Note that in Québec, eligible medical expenses must be reduced by 3% of family income. If your medical expenses for the current year are already in excess of the threshold, consider paying for additional expenses which are expected to arise in the near future now. Although most medical expenses are only paid as the medical services or supplies are required, some types of expenses can be paid for in advance such as glasses or contact lenses. You may want to consider this if it helps you to get a larger credit. If you’re paying for a major expense on an instalment basis (such as braces for a child), consider paying the balance owing early to maximize your medical credit claim. If you are interested in how this type of planning could benefit you, speak with one of our trusted BDO advisors.

This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of November 27, 2017