Which medical expenses are tax deductible?

JOHANNESBURG – The current tax filing season, which covers the 2014 tax year, marks the last time individuals will be able to claim a tax deduction for qualifying medical expenses.(

From next year, this deduction will be replaced with a medical tax credit, similar to the one already applicable to medical aid contributions for taxpayers below the age of 65.

Over the last few years tax deductions for medical aid contributions and expenses have gradually been replaced with a credit system. While a deduction lowers a person’s taxable income, a credit (rebate) reduces the tax liability.

Somaya Khaki, project director for Tax Suite at the South African Institute of Chartered Accountants (Saica), explains that in the current filing season, taxpayers over the age of 65 will be able to claim a full deduction for all medical expenses paid in the 2014 tax year (March 1, 2013 to February 28, 2014).

Taxpayers under 65 with no disability or disabled dependent will be allowed to deduct only part of the excess medical expenses based on a formula in the Income Tax Act, she says.

Where the taxpayer is under 65 with a disability or a disabled dependent, qualifying medical expenses will be fully deductible.

But what types of medical expenses are allowed?

Khaki explains that taxpayers may claim out-of-pocket expenses for amounts actually paid, but not recovered from their medical scheme.

Examples of qualifying out-of-pocket expenses include services and medicine supplied by registered medical practitioners, as well as specialists and homeopaths. Expenses for hospitalisation in a registered hospital or nursing clinic and home nursing by a registered nurse, midwife or nursing assistant are also allowed, she says.

The deduction also covers prescribed medicines from a pharmacist and medical expenses incurred and paid outside South Africa, but does not include over-the-counter medication, she says.

Taxpayers have to be able to provide proof of payment for these expenses during the tax year. The deduction won’t be allowed if it was merely incurred and not also paid during the year.

Moreover, it is fairly common for the South African Revenue Service (Sars) to request supporting documents for medical expenses during its verification process.

Khaki says taxpayers will need the income tax certificate from their medical scheme for the period March 1, 2013 to February 28, 2014 as well as receipts of qualifying medical expenses paid and not recovered from their medical scheme.

If the taxpayer or one of his dependents has a disability, the taxpayer would also need a completed Confirmation of Diagnosis of Disability form (ITR-DD).

“The form is available on the Sars website and must be completed by a registered medical practitioner. All receipts for expenses incurred in respect of a disabled dependent must be kept for at least five years,” Khaki notes. 

This article was originally posted on Moneyweb website:

http://www.moneyweb.co.za/moneyweb-tax/which-medical-expenses-are-tax-deductible