Medical Expenses and Celiac Disease
Did you know that you can claim a medical tax credit for the cost of your gluten free food? Here’s how.
Updated for the 2011 income tax year
A brief history of celiac disease and income taxes
In the last decade several celiac attempts to claim the disability tax credit have been disallowed by the courts. In August 1997, Hagen vs the Queen’s claim for the disability tax credit was disallowed. In April 1998, MacMaster vs the Queen suffered the same fate. In August 1999, Mantha vs the Queen a claim for medical expenses was also disallowed. In this case the judgment said that the claim for gf food as a medical expense was rejected because the food had to be prescribed by a doctor and dispensed by a pharmacist.
But the tide was beginning to turn—In November 1999, Leduc vs the Queen, a disability tax credit was allowed but as these were informal proceedings, this judgment did not set a precedent and was not binding on subsequent cases. After this an April 2001 case, Hamilton vs the Queen was allowed the disability tax credit for this taxpayer with both celiac disease and diabetes. The Minister of National Revenue appealed this ruling. In September 2001, Noaille (both celiac and lactose intolerant) also won a ruling to claim the disability tax credit. In March 2002 Hamilton won his case in Appeal Court and in May a claim by Church was allowed.
The Department of Finance acted swiftly to stem the tide of celiacs claiming this tax credit and in August 2002 they proposed closing the disability tax credit window for celiacs.
Medical Expenses and Celiac Disease
A new window opened for celiacs in the 2003 Federal Budget which also finally closed the door on claiming the disability tax credit. Instead of claiming a disability credit, celiacs could now claim the incremental cost of gluten-free food as a medical expense.
Claiming allowable medical expenses Who can claim?
- Patient must have celiac disease.
- Patient must be certified by a medical practitioner as requiring a gluten-free diet. Keep a copy of your doctor’s letter in case you need it in subsequent years.
- Actual claim can be made by individual, spouse or parent (for minors with celiac disease) Since total medical expenses must exceed 3% of net income (or $2109 whichever is less) it may be advantageous for the family member with the lowest income to make the claim.
What is allowed?
- The incremental cost of gluten-free products.
- Difference between cost of gf products and non-gf products on an item by item basis.
- Generally limited to products specifically produced and marketed for gf diets.
- Can claim “intermediate items”, that is baking supplies and ingredients to make gf food.
- Only portion related to person with celiac disease. For example, if there is only one celiac in the household but everyone eats the gf bread, then only the portion eaten by the celiac can be claimed. But as we pointed out, non-celiacs don’t eat gf bread in preference to regular bread.
How to claim
- Calculate incremental cost of gf food. This means saving all your food receipts for the year and listing easily comparable items such as 52 loaves of gf bread @ $6 per loaf. Compare this with an average price of regular bread. Then deduct the cost of regular bread from the cost of gf bread and enter the amount into the claim column. It is not unreasonable to take into account the difference in size of bread loaf, whether comparing by weight or number of slices. Do the same thing with baking items such as rice flour and compare it with wheat flour by weight. Some items such as xanthan gum do not have an equivalent and you would not have bought them at all if you were not compelled to follow the gf diet. In these cases only, claim the whole cost of the item. Apart from this one possibly reasonable exception, do not attempt to claim the full costs of gf foods. If you are caught, your return will likely be flagged for regular and repeated scrutiny.
- Determine portion related to person with celiac disease.
- Add to claim line for other medical expenses
- Line 330 of Schedule 1 (Federal)
- Line 5868 of Schedule BC428 (Provincial)
- Total medical expenses must exceed 3% of net income (to a max of $2,109) See previous note about the lowest income earner filing on behalf of celiac family member.
- Expenses can be claimed for any 12-month period ending in the year.
- Receipts to be submitted if paper filing. If the bundle of receipts is ridiculously huge, try submitting just your summary sheet with a note that receipts are available on request.
- Receipts must be retained if filing electronically. You may be required to produce your receipt evidence at any time even after receiving your Notice of Assessment. When returns are electronically filed, only the medical tax credit total is transmitted. The fact that you are a celiac claiming for the incremental cost of gf food as part of your medical tax expenses will not be apparent. A big jump in your medical tax claim could trigger a review. For example if you have never made a medical tax claim before and suddenly you are claiming $3,000 the CRA may want to know why.
What is it worth?
- 15% Federal credit of allowable expenses
- 5.06% BC credit equal to lowest marginal income tax rate
- $1,000 of allowable expenses saves tax of $200.60
- $30,000 net income, $1,500 medical expenses saves $120
- $50,000 net income, $1,500 medical expenses saves $0
To access the CRA web site click http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/clc-eng.html
Information provided by Victoria Chartered Accountant Anthony Lobmeier.