Disability-Related Federal Personal Income Tax Measures

Medical Expense Tax Credit

The medical expense tax credit (METC) recognizes the effect of above-average disability-related and medical expenses on an individual’s ability to pay tax. For 2005, the credit equals 16 percent of qualifying expenses in excess of the lesser of $1,844 and 3 percent of net income. The net income threshold is used to determine above-average expenses and it is fully indexed to inflation. There is no upper limit on the amount of eligible expenses that may be claimed.

The list of eligible disability-related and medical expenses is regularly reviewed and expanded in light of new technologies and other disability-specific or medically related items.

Taxpayers may claim the medical expenses that they or their spouses incur. The 2004 budget proposed to allow caregivers to claim more of the medical and disability-related expenses they incur on behalf of dependent relatives. Specifically, for medical expenses paid on behalf of dependent relatives, such as a grandparent, niece or nephew, taxpayers will be able to claim qualifying medical expenses that exceed the lesser of 3 percent of the dependant’s net income and $1,844 (for 2005). Based on 2004 budget proposals, the maximum eligible amount that can be claimed on behalf of dependent relatives will be $5,000.

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