When you qualify for tax credits for medical expenses
Taxpayers who are 65 and older, or who have a disability in the family, should be aware that there are tax benefits
Have you had an expensive year with your family's medical claims? If so, you may be wondering how much of these claims you can use for tax benefits.
To begin with, it is important to understand that since March 2014 you have not been able to claim any tax deductions for medical-related expenses.
This means you can claim these expenses as a credit against your actual tax payable.
Potential allowable claims are broken up into two main categories - contributions to your medical scheme and medical expenses that you have been unable to recover from your medical scheme or other type of policy. These costs are known as "qualifying medical expenses".
Different rules apply to each of three categories of taxpayer:
Taxpayers 65 and over
If you are 65 or older you qualify for the basic monthly tax credit for contributions paid to a medical scheme - R310 for yourself as principal member (assuming you are paying the contributions), R310 for the first dependant (R620 in total), and R209 for each additional dependant.
These taxpayers qualify for two more potential credits:
33.3% of so much of the contributions you pay to a medical scheme as exceeds three times the amount of the medical scheme fees tax credit to which you are entitled; and33.3% of the amount of any qualifying medical expenses you have paid and not recovered from your scheme or policy.
The last point is important to understand. It means, simply put, that you can claim a tax credit of 33.3% for all expenses you pay to a medical professional - for hospitalisation or prescription medication - and for which your scheme or policy fails to reimburse you.
Where you, your spouse or your child have a disability
As a taxpayer with a disability or a disabled spouse or child, you qualify for exactly the same credits as a taxpayer 65 or older:
The basic monthly tax credit for contributions paid to a medical scheme - R310 for the contributions you as the principal member pay, R310 for the first dependant you register on the scheme (R620 in total), and R209 for each additional dependant per month.
33.3% of so much of the amount of the contributions you pay to a medical scheme that exceeds three times the amount of the medical scheme fees tax credit to which you are entitled; and33.3% of the amount of any qualifying medical expenses you pay and do not recoup from your medical scheme or policy. This includes all qualifying medical expenses for yourself, your spouse and children, not just the medical expenses incurred by/for the disabled family member.
As is the case with taxpayers aged 65 or older, this last point is important for taxpayers who are disabled or who have a disabled child or spouse.
l The definition of disability in terms of the act is "a moderate to severe limitation of any person's ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment, if the limitation -
(a) has lasted or has a prognosis of lasting more than a year; and
(b) is diagnosed by a duly registered medical practitioner in accordance with criteria prescribed by the commissioner."
According to the South African Revenue Service (Sars) website, if you wish to claim an additional tax credit for a disabled family member you must complete a Confirmation of Diagnosis of Disability form.
You don't need to submit this with your annual income tax return, but it must be retained for compliance purposes.
The form also needs to be completed and endorsed by a registered medical practitioner every five years if the disability is of a more permanent nature.
If the disability is temporary, the form will be valid for only one year, which effectively means that a new form must be completed for each year of assessment during which a disability claim is made. A disability will be regarded as temporary in nature if that disability is expected to last for less than five years.
Taxpayers younger than 65 with no disability or disabled family members
These taxpayers qualify for the standard monthly medical scheme credits (the R310 and R209), and then a 25% credit of the contributions that exceeds four times the amount of the medical scheme contributions tax credit, and all qualifying medical expenses that exceed 7.5% of the taxpayer's taxable income.
In practice, you are most unlikely to cross this threshold unless your taxable income is low, and your non-reimbursed qualifying medical expenses are very high. The average taxpayer will therefore normally only qualify for the monthly tax credit.
In summary, taxpayers who are 65 and older, or who have a disability in the family, should be aware that there are tax benefits from the medical tax credit system.
• Joffe is head of legal services at Discovery Life