Feb 11, 2014 Box 85 is My Box

by Eileen Reppenhagen

My husband says he will put this inscription “Here lies the instigator of Box 85” on my tombstone.  

You see, Box 85 is my box. I am to blame for lobbying the Minister of Finance for many years and the result was a Box on the T4, it still isn’t mandatory, but it’s there.  

I don’t think anyone else was brazen enough to warn the Finance Minister that if he didn’t put a box on the T4, they would go to the unions for support. After all, the payment for medical premiums for private plans is no different than the deduction for Union Dues, which has always had a box. It took a few years, and a few different approaches, but in the end, I got my box. The problem, is it’s not mandatory YET.

For that, I need your support. Tweet @JimFlaherty to request Box 85 be made mandatory!

Here’s why.

I’ve been doing taxes for other people since 1986. I would ponder why it was that each employee in Canada whose employer deducted premiums for EH&DB had to ask their employer for a letter or be able to point to their final paystub and say here’s the premium. It wasn’t’ always obvious, hence the need for a letter.

Some government pensions and employers would issue a letter every year and include that amount on their letter because they knew that people could take advantage of claiming those premiums as a medical expense. But most employers didn’t report the amount, so you’d have to know to ask for a letter to make a claim.

More often than not, my clients had no idea that those premiums were valuable.

The premiums might be somewhere between $1,000 and $2500 or more if both spouses have plans. Yes, if both spouses have plans, there might not be much that isn’t covered, but those premiums and anything that isn’t covered will likely form something of a claim. Keep both spouses reports from their plans to determine what else wasn’t paid, plus anything that is paid directly, like the portion of your dental work that isn’t covered, and usually the plan will only cover a small amount of the cost of glasses, which can be very expensive if you buy nice frames and wear progressive lenses.

Valuable… yes, because it’s possible to claim those premiums, and the part of the medical expenses for everything medical that is on the list provided by CRA. There’s over 150 items on that list. You can claim the premiums and the part of those medical expenses you don’t get reimbursed for, to reduce the tax you pay.

There is one catch. The total must exceed 3% of your net income to be claimable on either you or your spouse’s tax return. Usually the lower income spouse will make the claim, because of course, 3% of their net income will be less. What most people didn’t know was that 3% topped out at $2,152 for 2013, (its’ indexed each year) and EVERYTHING over that amount was claimable. Click here to see the calculation explained by CRA.

After you deduct 3% of Line 236 or $2,152, whichever is lower, all of your personal tax credits get added together, and multiplied by the lowest tax rate (go figure), so if your federal tax is 15% and your provincial tax is 5%, you’d get a reduction in tax of 20% of whatever was over the 3% of net income or $2,152, whichever is LOWER.

What’s interesting is many people, including some really smart accountants would say, you can’t claim anything over 3%.  I couldn’t believe they were saying that! I’d say, no, you can claim EVERYTHING OVER THAT AMOUNT.  Claim medical expenses combined for you, your spouse and your children net of 3% or $2152, whichever is lower, on Line 330. Claim dependent relative’s medical expenses if you paid for the purchases, net of that dependent’s 3% of Line 236, or $2152 (2013), whichever is lower, on Line 331.

Best way to say this? Sometimes using ridiculous numbers help to explain. So here goes.

If you earned a million dollars, and had open heart surgery on an emergency basis in some foreign country and it was totally necessary and you couldn’t get back here or there was no one here who could do that surgery, you could claim the cost, less than $2,152 threshold. So, if it cost $200,000 for the surgery, claim $197,848.

If you paid EH&DB or had a PHSP, and Box 85 wasn’t filled in on your T4, share a link to a story on my blog about how a Canadian Payroll Association student did a project for her homework. Your employer could save money. Arlene proves in her homework project how her employer benefited because they instituted Box 85 on their T4’s at a hospital in Toronto.

This is just a part of the story about how Tax is a Family Affair. For more on how tax credits work, check back for more blog posts, visit my website tab, Learn about Tax>Tax is a Family Affair,

Want to learn more about tax? Click here to register today for a free Canadian MoneySaver Magazine online webinar “Tax is a Family Affair”, attend by phone, on your computer, or on your mobile device.

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  • May 9, 2014
    By Eileen Reppenhagen

    Follow up to this post. If you received a T4A for 2013 that included Box 135, that box was a report on your premiums paid for Dental and Extended Health when you're on a pension. If your Box 135 wasn't completed (apparently RCMP is scheduled to include that next year) ask your pension administrator to report your premiums paid for private health plans in this box.

    Box 135 carries forward to your medical expenses claim. If your premiums are about $900 a year, you might find that when you include the expenses the plan doesn't cover for glasses, prescriptions, dental, medical devices, etc., that your expenses exceed the threshold to make a claim for medical to reduce the tax you pay. If you've never claimed those premiums before, you could, if you qualify for a fairness request, amend your tax returns back for ten years. Just remember that if you do open your returns up to audit, they're open for a further three years before they are statute barred again.

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