Archive for October, 2018

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Year-End Tax Tip: Brush Up on Medical Expenses

Claiming medical expenses can be painful for most taxpayers: there are so many receipts and tiny numbers involved. But it can be worthwhile, especially if you schedule your dental and medical treatments in a tax-savvy manner before year-end.

Most people know, for example, that they can claim medical expenses for their nuclear family: mom, dad and their minor children. But did you know you can also claim for others who are dependent on you if they are resident in Canada? That includes children over 18, grandchildren, parents, grandparents, siblings, even uncles, aunts, nephews and nieces.

There are also a host of interesting costs that are deductible, provided they are unreimbursed by a medical plan. So, for example, if you are on a medical plan at work and it covers 80 percent of all these costs, you can claim the 20 percent that is not covered by the plan. Furthermore, the premiums for the private medical plan are claimable too, including those provided by an employer. Check pay stubs and Box 40 of the T4 slip for the premiums in this case.

Often forgotten claims are the unusual ones:

  • Medical marijuana or marijuana seeds, but they must be purchased from Health Canada, or a licensed person under the Marijuana Medical Access Regulations (MMAR). Costs of growing not deductible. Keep in mind, guidelines may change following legalization on October 20.
  • For people who have celiac disease, the incremental cost of acquiring gluten-free food products can be claimed, but you’ll need to compare the cost of gluten-free vs non-gluten-free food products. That person must also have a written certificate from a medical practitioner that a gluten-free diet is required. Deductible costs include the incremental cost of gluten-free bread, bagels, muffins, and cereals, rice flour and GF spices. Only the costs related to the person with celiac disease are to be used in calculating the medical expense tax credit . . . so if others consume the same food with the patient, a proration is necessary.

Generally, the costs of visiting the following medical practitioners are eligible: dentist or dental hygienist, medical doctor, optometrist, psychologist or psychoanalyst, chiropractor, naturopath, acupuncturist or dietician, to name a few.

Eligible medical treatments include: medical and dental services, eyeglasses, hearing aids and their batteries, attendant or nursing home care, ambulance fees; service dogs, guide dogs or dogs to manage severe diabetes or psychological conditions, including care and travel for training; prescribed alterations to the home to accommodate disabled persons; cost of training a person to provide care for an infirm dependant; and even tutoring services for a patient with a learning disability or mental impairment.

Remember, the claim for medical expenses is reduced by 3 percent of the claimant’s net income (or the dependant’s net income if claiming expenses for other dependants), to a maximum of $2,302 in 2018.

This maximum is reached when net income is over $76,733. Generally, that means the spouse with the lower income will get the biggest claim, but it is worth nothing if that spouse is not taxable. In those cases, carry the receipts forward for a possible future claim, as medical expenses can be claimed in the best 12-month period ending in the tax year.

That’s where year-end tax planning really comes into play. By grouping expenses left unclaimed from last year, timing your expenses for this year may provide for a bigger claim in your best 12-month period. This could be from November 1, 2017, to October 31, 2018, for example. A DFA – Tax Services Specialist can help you through the process, provided that, as a taxpayer, you’ve done your due diligence in keeping the appropriate receipts and documentation.

Tax Specialization: Soft Skills are Equally Important

There is a very bright future for the tax preparer who makes a great decision to become the Tax Services Specialist of the future. But, to offer the best advice in that regard, tax specialists must have more than precise technical skills.

To go beyond the filing of returns and move their offering to a specialized service model, advisors must be prepared to spend more time nurturing their relationships with a multi-stakeholder professional team; that is, with all the people involved in maximizing the client’s personal and financial goals, over the long term. To accomplish this, the soft skills matter.

Tax specialists must have excellent communications skills. In providing high-value advice at crucial financial times, they act as an articulate tax educator, both verbally and in writing, to take their individual client and, where required, the family as a whole, on a journey to continued financial health.

Tax specialists excel at conducting thorough interviews, not just during tax season, but by making a point of meeting the client more often: before, during and after significant lifecycle events. The result is a relationship built on trust, and a trusted advisor has the privilege of obtaining all the information required to make the most informed recommendations, even at the most difficult times in life: when there is great loss due to relationship breakdown, illness or death.

Tax specialists are also advocates for their clients. They position themselves to be the “go to” financial advisor throughout a lifetime of personal and financial events. They coach their clients always to ask themselves the following question: “Is there a tax consequence to the decision I must make?” If the answer is “yes” or “maybe,” the right action is to seek advice. In doing so, clients and advisors can improve long-term, after-tax results as joint decision-makers supported by a multi-stakeholder team. The bigger the financial decision, the more important this “pre-consultation” is.

Perhaps most important, tax specialists represent their clients with confidence and professionalism to the tax department, whether during an audit or in adjusting previously-filed returns. This is possible because they know how to research relevant tax law, understand how it is administered by CRA and what the outcomes of recent jurisprudence have been.

In fighting for their clients’ Taxpayer Rights, tax specialists are also highly adept at applying relevant tax provisions to all the previously-filed returns CRA may select for audit, thereby matching the “hindsight” CRA brings to the audit process with skillful precision. Because they are passionate about making sure their client pays only the correct amount of tax and no more, tax specialists see themselves as stewards of hard-earned family wealth. Tax efficiency, in other words, really matters.

Where do other advisors from the financial services fit in? By working with a tax specialist, financial advisors make sure there is no “tax gap” in the investment strategy and process developed for the client. By following a common strategy, tax-efficiency becomes part of the investment decision-making that occurs throughout the year. Quite possibly a tax specialist, too, this professional works alongside the tax specialist to make sure the planned-for results are achieved.

Educator, advocate and steward: that’s the three-part role of the tax services specialist. Working together with financial advisors to deliver on a Real Wealth Management strategy, this new brand of tax professional brings tremendous value in the evolving tax and financial services industry.