YOUR SOURCE FOR TRACKING YOUR MEDICAL EXPENSES AND SAVING THROUGH GIVING

Canadians are headed towards another tax season and the Canadian Celiac Association (CCA) is pleased to offer you some practical tools and tips on how you can keep more money in your pocket through medical expense claims and lower your income tax through charitable gifts. Special thanks to Lynda Marie Neilson - a CCA national and BC volunteer - for lending her expertise.
 
This issue has been generously brought to you in part by Nairn’s.
IS GLUTEN FREE COSTING YOU MORE? STAKE YOUR CLAIM!

A diagnosis of celiac disease (CD) brings about new challenges and a whole new dietary lifestyle. Shopping and dining out can be a drain on your wallet. Many gluten-free products are more expensive than their gluten-filled options and restaurants often charge a surcharge for gluten-free (GF) rolls or options.

Since the gluten-free diet (GFD) is the only current treatment and no pharmacological drugs are available, CCA reached out to the Canadian Revenue Agency (CRA) a number of years ago to allow for financial relief for patients. 

While far from perfect, the CRA allows Canadians with a formal diagnosis – a positive biopsy - to claim for the incremental cost of the GFD recognizing it as a medical expense. 

Many people are not crazy about the amount of work collecting and tracking receipts. The CCA National Board is gearing up to finalize its three-year strategic plan and the tax issue has been tabled for review. 

CCA recently hosted a Help@Home webinar featuring CCA volunteer, Lynda Marie Neilson. We encourage you listen to the recording to learn more about how to make your claim. We've also included a copy of the webinar slide deck and a spreadsheet template, too!
During our Celiac and Tax: Understanding the Incremental Medical Expense Claim webinar, we received some great questions. We asked Lynda Marie Neilson to also provide these along with answers below to help you navigate the process. We've grouped them by: diagnosis, medical expenses and receipt management .
DIAGNOSIS

Q: Do you need a letter from doctor to claim GF income tax deductions?
A. Yes, you need a letter or note on a prescription pad (must have doctor’s contact information on it) and it needs to include three items:
1.      Date of diagnosis
2.      Diagnosed with celiac disease (CD)
3.      Need for a gluten-free diet for life 
Q: What is the maximum amount that we can claim in a year?
A. The expense that is claimed must be reasonable and what one person diagnosed with CD (or more if there are more than one celiac diagnosis in a family) would consume in a year. Not aware of a maximum – it depends on the food that the person with celiac eats.

Q: Can you claim a deduction for someone who is gluten intolerant? 
A. You must be diagnosed with CD. Non-celiac gluten sensitivity (NCGS) or other gluten allergies do not qualify for this tax credit at this time (Confirmed with the CRA on January 9, 2020)

Q: Are you able to ask Revenue Canada if one has a doctor’s note indicating that they must eat a GFD – such as diagnosed as NCGS if they can participate in this credit?
A. CCA is going to contact Revenue Canada and when they have an answer will post it in their various newsletters and on their Facebook support group.
MEDICAL EXPENSE

Q: Can one claim the difference between the cost of GF beer vs non GF beer?
A. Cheers! Yes, you can.
Q: Is there a limit on what type of products we can claim? For example, GF labelled bacon, pasta, pasta sauce or are we limited to baked products?
A. You can claim any food or beverage item that is labelled GF. There is no limit – it all depends on what the person with CD eats.

Q: Can you use GF labelled supplements as a deduction? Or any supplements prescribed by a doctor or naturopath for health issues related to celiac?
A. The medical expense deduction is for food and beverage only. Here is the guidance from the Revenue Canada website:   “You cannot claim over-the-counter medications, vitamins, or supplements, even if prescribed by a medical practitioner (except vitamin B12 in pill, injection or other forms – prescription is needed)”

Q: How about claiming for items purchased in a GF bakery? Do they apply?
A. Yes, they apply and can be a very good source of an incremental cost paid. Take a GF cookie for example. You purchase a Wendel’s GF cookie for $2.50. Keep the receipt.
 
  • Enter on your spreadsheet as one GF cookie in a “Single Item” group. 
  • Now your comparison cost would be for cookies – find an ad for gluten cookies such as Superstore where there are (for example) 24 in a box for $12.00. So, $12/24 - $0.50 each. 
  • So, your comparison cost is $0.50 (which you will use all year long for all the single GF cookies that you purchase) to the $2.50 you paid for your one GF cookie OR 1 x ($2.50 - $0.50) = $2.00.
Q: Can you expense all the GF products for the house if you are maintaining a GF household to prevent cross contamination?
A. The only incremental cost medical expense that can be claimed is for the person diagnosed with CD. If the family all eats GF then the individuals NOT diagnosed with CD cannot be included in the expense calculation. There are two ways of calculating this. For example, we will use a household of four, with one person who has CD.

1.      Enter ALL receipts on the spreadsheet and calculate the total incremental cost of GF food. Then divide by four. That quartered amount will represent that one person’s portion and should be entered as the 'incremental cost medical expense'.
2.      Have two spreadsheets – one for common GF items like pasta, sauces, pizza crusts, cereal etc. that the family shares. Calculate the common spreadsheet as outlined in number one. 

On the second spreadsheet enter only food consumed by the person with CD– such as GF cookies, GF crackers etc. The incremental cost calculated on the second spreadsheet is added to quartered amount of the common spreadsheet and that is entered as the 'incremental cost medical expense'.
Q: I understand the incremental cost should be more than $2,000. Otherwise it won't help much. Is this right?
A. Not quite. The medical expense line on your income taxes is based on the net income of the person claiming it. There is a “deductible” of is 3% of the net income up to $2,352 for 2019 tax year. So those with high net income will be capped at the $2,352 deductible for 2019’s taxes. Your total medical expenses (which the incremental cost of GF food is one type) above the calculated or capped deductible amount will be applied as a non-refundable tax credit for medical expenses.

Q: Do you consider it worth your time doing this claim for this medical cost? A lot of people that I have talked to say that it is not worth the time. My son and my husband have been diagnosed with CD.
A. As discussed in the presentation, this credit is not for everyone. You do need other medical expenses to get past the “deductible” for the medical expense line for whomever claims the medical expenses for the family. One does not know at the beginning of the year what medical expenses they will have, so spending 15 minutes once a month on the spreadsheet is not that laborious so that at the end of the year it is done and ready to add to the other medical expenses from the tax year. You have two people with CD diagnosed so your incremental cost expense for gluten-free food will be higher than just a single person with CD.

Q: What else can I claim in the medical expense category to get above my 3% Net Income deductible?
A. Some basic ones are medication, physiotherapist, massage, travel insurance, dentist etc. Please see the following link (2018) for the complete list:  here. Is there not a link for 2019? If not then fine, if there is one we should be using updated version.
RECEIPT MANAGEMENT

Q: What happens if I didn’t keep any grocery receipts?
A. For any income tax credit, including the medical expense, you need receipts to prove your claim. Without grocery receipts you will not know how many of each food items you purchased and at what cost, so the average cost comparison cannot be done. The CRA will not accept estimates of the amount of food purchased or its cost.

Q: I didn’t realize I needed to have flyers or a comparison cost. What do I do now that the year is done? I have no proof of comparison prices.
A. Go to an online grocery store now and add all the gluten items to your cart that are comparable to the gluten-free items that you have on your spreadsheet and use them for your comparable cost calculations. Do not estimate anything. You can also use your past grocery receipts for the year, to find prices for the comparable gluten items.
Q: Can you claim food purchased in the United States or other countries when on vacation?      
A. YES! Just remember to apply the exchange rate to the items that you purchased, include your grocery receipt and compare it to food at your local grocery store.
Q: What happens if the item purchased does not say GF on the receipt?
A. After you have gone grocery shopping, just mark a gluten free (GF) on the items on your grocery receipt that are marked GF on the packaging. 

Q: Do you have to prove the food item is labelled GF?
A. It is advisable to record the name of the food, if not explicit on the receipt, somewhere – such as your spreadsheet or side of the receipt so that both you and Revenue Canada know that the item is gluten free. No, you do not need to keep the packaging to prove the item is GF. 

Q: Do we really need to have a picture or flyer of the price of a non GF item? Can we just go into the store with a clip board and write down the price with the store name and what the product is?
A. It is up to you to decide how you will prove, if audited, that the price that you have written down is valid and not estimated. The reason why flyers or printouts of online carts from grocery stores is recommended is that they contain all the information that you need such as date, product name, size and price in one place.
Q: Using Breton crackers for example, the regular gluten crackers can be the same price as their GF crackers, however, the size of the GF product is smaller. I have been calculating the cost based on weight - I assume this is allowed.
A. Yes, this is allowed and preferred. We suggest that you group all like size items together in a category (within a small range of weights such as 200-300 grams) and then find a comparison gluten item cost for that category. If the comparison gluten item is larger then just divide down to a common denominator which will also adjust the price of the gluten product too. For example, my cookies were about 300 grams last year and my gluten comparison product was Peak Freans at 600 grams for $6.00. So I divided the Peak Freans price and grams in half to $3 and 300 grams and that was my comparable price and item weight. 

Q: I buy different types of GF flour in bulk to create my own blends for baking. Am I able to claim the different GF flours as an expense?
A. If you are purchasing GF products to make GF food for a person with CD, then the GF products are able to be claimed as part of the incremental expense calculation. Enter your flour purchases in one category (such as flour) and by 100 grams purchased. So if you bought 500 grams of sourghum, 200 grams of tapioca starch and 1 kg of brown rice flour you would have an entry of 5, 2 and 10 respectively or a total of 17 units of 100 grams. Then for your yearly comparison, find a really large bag of gluten flour (such as 10kg) and divide down (in this case by 1000 to get the price in 100 grams) and then compare that to the average cost of your flour category which in this case is in 100 gram increments.

Q: If I bake GF bread for my celiac husband can I claim the total cost to create the GF bread including the ingredients it contains that are not gluten free?
A. You can only claim the items that are labelled GF that you use in baking GF products like bread, cookies, buns etc. – so the GF flours are claimable, however butter, sugar and other naturally GF items are not able to be claimed.
Q: How many years are you required to keep your receipts for in case Revenue Canada wants to audit your medical expense claim for GF food expenses?
A. The same as all income tax information – seven years.  Please note – if Revenue Canada wants to audit your GF food expenses they will audit the whole medical expense claim not just your GF food expenses as if you E-filed, they have no idea what made up the single amount you claimed for medical expenses.

Q: Could you please list the categories you use in your spreadsheet?
A. The categories on the spreadsheet are:
  • Bread
  • Cold cuts
  • Cookies
  • Crackers
  • Flour under 1 lb, Flour over 1 lb (both calculated by pound),
  • Pasta,
  • Cereal box (such as Chex),
  • Cereal bag (such as Nature’s Path Eco bag),
  • Single serve cookie,
  • Soya sauce,
  • Frozen pizza (large pizza),
  • Frozen single serve pizza (small pizza),
  • Bars (such as Kind),
  • Mac and cheese (Annies),
  • Pie crust
  • Perogies and,
  • Frozen meals (such as M&M)

Q: If GF items are not available in the location you live (such as a small community), are you able to add the shipping costs to the items that you order online if you are diagnosed with CD?
A. This question has been sent to Revenue Canada for clarification. When an answer is obtained, it will be posted in a newsletter and on the Facebook Support group.

Q: Is there a tax deduction for a university student with celiac for the residence meal plan?
A. If there is no additional cost for the university meal plan then the answer is no. What to do if there is an additional cost for the GF meal plan we have asked Revenue Canada for a ruling of what to do. When an answer is obtained, it will be posted in a newsletter and on the Facebook Support group.
MORE QUESTIONS?

If you have any further questions regarding the medical expense category, please call Revenue Canada at 1-800-959-8281.

If you have questions regarding Celiac Disease or Gluten Related disorders please contact the CCA Client Support Desk at clientsupport@celiac.ca
Do you already claim your GF incremental medical expenses?
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FEELING CHARITABLE? DONATING SECURITIES IS A TAX-SMART STRATEGY

JOHN HEINZL, SPECIAL TO THE GLOBE AND MAIL
Originally published: September 13, 2019 Reprinted with permission of author.

Q. "I'm planning to make a donation of $10,000 to a local charity, either with cash or securities. My adviser is happy with the current balance in my portfolio and doesn't think we need to sell anything. However, I suggested that I could donate securities to take advantage of the tax break on capital gains and then use some of the cash in my account to repurchase the shares to keep my investment mix the same. Do you see any flaws in this approach?"

Donating listed securities that have appreciated in value is a win-win. The charity receives funds to spend on worthy causes, and you get a donation tax credit and – thanks to a further tax break on in-kind donations of listed securities – avoid capital-gains tax on any appreciation in the value of the shares. Even though this tax relief on capital gains has been available since 2006, many investors aren’t aware of it.

“Donating securities ‘in-kind’ is perhaps the most missed opportunity in charitable giving,” says Jamie Golombek, managing director,for tax and estate planning with Canadian Imperial Bank of Commerce.
“I call it ‘tax-gain donating,'” Mr. Golombek says. “While most of us might be more familiar with the concept of tax-loss selling, which involves crystallizing a capital loss so it can be used to shelter capital gains, tax-gain donating involves crystallizing gains on winning stocks or mutual funds by donating them ‘in-kind’ to charity.”
Here’s how it works.
Say you plan to donate $10,000 of shares that have an adjusted cost base of $2,000.

If you were to sell the shares first and donate the cash, you would have to pay tax on the $8,000 capital gain. Assuming your marginal tax rate on regular income is 50 per cent, you’d pay capital-gains tax of 25 per cent – or $2,000.

But if you instead donate the $10,000 in shares, no capital-gains tax applies.

What’s more, in both cases you would also receive a charitable donation receipt for $10,000. Depending on the province or territory, your gift would produce a charitable donation tax credit worth at least 40 per cent, or $4,000. (This assumes you have already made $200 in charitable donations, as the charitable tax credit is significantly higher above this threshold.)

Wondering how large your tax credit would be? The federal government has an online charitable donation tax credit calculator. The government also maintains a database of charities and other qualified donation recipients that can issue official receipts. Find it here.

Here a couple of things to keep in mind. Only listed shares (or other eligible securities such as listed bonds or fund units) that are held in a non-registered account can be donated. You may claim the entire donation credit in the current year, or spread it over the next five years. “You would only do this if you are caught by the donation-income limitation, which generally limits donations in a year to 75 per cent of your net income, which is not a problem for most of us,” Mr. Golombek says. Either way, the charity receives the full value of the gift immediately.

Regarding your plan to repurchase the securities in your account, it makes perfect sense, Mr. Golombek says. “You get the donation tax receipt, pay no tax on the capital gain to date and increase the adjusted cost base of the securities back up to their current fair market value, reducing your ultimate tax bill on a future sale,” he says.

E-mail your questions about the article to jheinzl@globeandmail.com
COOPERATORS SHOWS HOW YOU CAN SAVE YOUR ESTATE TAX AND GIVE TO YOUR FAVOURITE CAUSE

Life insurance can be an effective way to help your favourite charity achieve their long-term goals.
Along with tax savings, the benefit of donating a life insurance policy includes the freedom to choose what type of policy and how much premium you pay. Your gift can’t be legally challenged because life insurance is considered separate from your other estate assets.

Donating a life insurance policy isn’t subject to taxes, probate costs or estate debts, and you can make a substantial contribution through relatively small monthly or yearly payments. At the same time, you’ll be rewarded for your donation through the charitable tax receipts you receive. The premiums on a $25,000 policy will cost far less than the payout amount over time, and when you include your tax credits, you end up paying even less overall for a very sizeable gift. 

Here are three ways you can donate a life insurance policy to a charity:

1. Take out a new policy in the name of the charitable organization. You’ll receive a charitable tax receipt for the cash value of the policy and for any premiums you pay.
2. Name the charity as the beneficiary of an existing policy. This is a good option if you already have a policy that your family no longer needs for financial stability. At the time of your death, the charity will receive the policy proceeds and your estate will receive the tax benefits.
3. Transfer ownership of an existing policy to the charity and receive a charitable tax receipt for the cash value of the policy. If you owe annual premiums on the policy, you’ll still pay them, but you’ll also receive tax receipts in the amount of your payments.

LEAVING LONG-TERM CHARITABLE GIFTS IN YOUR WILL

Whatever your age, having an updated will is an important part of estate planning, especially if you want to include long-term charitable gifts.

It doesn’t take much to leave a lasting legacy; if every adult in Canada left $100 in their will, charities could count on receiving millions in donations every year. Whether you choose to give to a large national organization or a local group, donating a life insurance policy can have a great impact on the people or issue your charity supports. 

However you choose to distribute your assets, make sure your will clearly spells out your wishes. A will saves your loved ones from struggling through estate complications. Your local Financial Advisor is ready to help with advice on estate and gift planning.

If you’d like to learn more, contact:

Jennifer Sharer
Financial Advisor/Owner, The Co-operators 
Jennifer Sharer Insurance Group Inc. 
550 Parkside Drive, Unit B2
Waterloo, ON N2L 5V4
Tel: 519-888-7580  Fax: 519-888-7581
Claims: 1-877-682-5246 

Reprinted with permission
DELIVERING FREE EDUCATION TO HELP YOU

GF 101: NAVIGATING THE GLUTEN-FREE DIET

Date: Wednesday, February 19
Time: 9 - 10 pm Eastern
Click to register for free: Click here

Join CCA Registered Dietitian Gauri Bawa for our one-hour FREE webinar on how to navigate the gluten-free diet. Perfect for individuals or caregivers of people who are newly diagnosed or just need some extra help. Sessions are interactive. Have your questions ready!
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