Sunday’s= Personal Tax
We have talked about the limitations on claiming medical expenses on your personal tax return before in these recommendations. Quick reminder — you can only claim the amount of medical expenses as a tax credit that exceeds 3% of your net income (subject to a maximum).
A family can combine their medical receipts and claim them all on one person’s return. The logical person to the make the medical expense claim is the family member who has the least amount of taxable income. The strategy here is that since the medical expenses can only be claimed when they exceed 3% of income — you want that 3% to be the lowest number it can be. This means applying the 3% to the family member who has the least taxable income. If you have a taxable income of $70,000 then 3% of that number is $2,100, so you can only deduct medical expenses that exceed $2,100. If your spouse earns $30,000, then the 3% of that number is only $900 and therefore you can deduct more medical expenses.
The medical expenses create a tax credit which is calculated at the lowest tax bracket so the credit is “worth” the same amount to every taxpayer. The credit is not higher if the taxpayer is in a higher bracket, the credit is always calculated at the lowest bracket.
However, there is no point in applying the credit to a family member who has no taxable income, such as a child, because there would be no tax saved. Spend a little time figuring out which family member should claim the medical expense credit and save a little money.