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What Medical Expenses Can You Claim Back from Tax

Posted 17 March 2016 under Tax


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Medical expenses are nothing to sneeze at. Private medical treatment is increasingly pushing the limits of medical aid scheme benefits and our wallets. It's an outlay few can avoid. Luckily, certain medical expenses come with a bit of tax relief in the way of tax credits.

A tax credit is a non-refundable rebate. This means that a portion of your qualifying expenses, in this case medical related spend, is converted to a tax credit, which is deducted from your overall tax liability (the amount of tax you have to pay SARS). You can't carry any unused credit over to the next tax year and it won't ever result in a negative amount or standalone refund from SARS. This means that if you don’t earn an income, but do contribute a medical aid, you can’t claim the medical credit.

But many people are unsure of what medical expenses are allowed, and even more unaware of the medical aid tax credit calculations used.

Let's sort that out, shall we?

Before we get into the actual numbers, though, it’s likely you’re not only paying for your own medical expenses but probably for those of your immediate and sometimes extended family too. For this reason, it’s important to understand what SARS considers as dependents.

Who SARS Considers as Dependents for Medical Expense Claims

SARS sees the following as dependents:

  • A spouse (husband or wife)
  • A child and the child of a spouse (e.g. son, daughter, stepchild or children, adopted child or children) who was alive during any part of the year of assessment, and provided that on the last day of the year of assessment he / she was unmarried and:
    • a minor, i.e. under the age of 18, or
    • under 21 years of age, but partly or entirely dependent on you for maintenance and not yet liable for normal tax themselves, or
    • under 26 years of age, but partly or entirely dependent on you for maintenance, not yet liable to pay normal tax themselves and a full-time student at a publicly recognised educational institution such as a university or technikon
  • Any other member of your family who relies on you for family care and support (e.g. mother, father, sibling, mother or father-in-law, grandparent or grandchildren)
  • Any other person recognised as a dependent in terms of the rules of a medical scheme or fund

Tax Deductible Medical Expenses

Medical Aid Contributions

SARS calls this rebate the Medical Schemes Fees Tax Credit and it applies to the fees paid by a taxpayer to a registered medical scheme for you (as the taxpayer) and your dependants. The credit is a fixed monthly amount of R286 for you as the primary member, a further R286 for your first dependent and R192 for each of your additional dependents.

If John pays for medical aid for himself, his wife and his 3 children, his tax credit will be calculated as follows.

R286 for John
+ R286 for John's wife
+ (R192 x 3) for his 3 children
= R1,148 tax credit per month

John's tax liability is therefore decreased by R1,148 per month. Note that this is a flat rate per month and doesn’t take your taxable income into consideration.

If you're paying your contributions via your employer, i.e. as a deduction from your salary or wages, your employer is obliged to use the credit system to adjust your PAYE tax accordingly. If not, completing the medical aid contributions section of your annual tax return will apply the permitted credit for your advantage.

Additional Medical Expenses Tax Credit

The Additional Medical Expenses Tax Credit is in place to provide some credit for excess medical expenses and comprises 2 parts:

  • Excess medical aid contributions, and
  • Out-of-pocket medical costs (i.e. those not reimbursed or claimed from medical aid)

Excess medical aid contributions are relatively straightforward to work out as you’ll use the total amount you paid towards medical aid as your base amount and then apply the formula applicable to your individual situation. We’ll get to this in just a moment.

Out-of-pocket expenses are a bit more complex. Out-of-pocket medical costs, as per SARS, are those expenses that you’ve paid for yourself, which have not been reimbursed from medical aid. (If you submit ALL your medical expenses to your medical aid, this amount is normally reflected on your tax certificate from the Medical Aid as 'claims not paid', 'amount not reimbursed' or something similar. Remember this won't include expenses you incurred but didn't submit to medical aid. You'll have to tally those up separately.) This doesn’t mean that you can include all and sundry from the pharmacy, though. SARS has certain restrictions on what qualifies as an out-of-pocket medical expense.

What are Qualifying Medical Expenses for Tax?

Examples of qualifying medical expenses are any amounts that were paid by you, as the taxpayer, during the year of assessment:

  • For professional services rendered and medicines supplied by a registered medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopaedist to you or any of your dependant(s)
  • To a nursing home or hospital, or any duly registered or enrolled nurse, midwife or nursing assistant (or to any nursing agency in respect of the services of such a nurse, midwife or nursing assistant) in respect of the illness or confinement of the person or any dependant of the person
  • For medicines prescribed by a registered medical practitioner and acquired from a pharmacist
  • Medical expenses incurred and paid outside South Africa

It's important to note that “over the counter” medicines - such as cough syrups, headache tablets or vitamins don't qualify as medical expenses - unless specifically prescribed by a registered medical practitioner and acquired from a pharmacist.

Right, so now we know what qualifies as medical expenses you can claim back, let’s have a look at how you go about working out your additional medical expenses tax credit.


The formula you need to use depends on two factors:

  • Your age - whether you're older or younger than 65, and
  • If you or your dependent(s) have a disability.


SARS is strict on the definition of a qualifying disability. According to the Income Tax Act, a disability is:

A moderate to severe limitation of that person’s ability to function or perform daily activities, as a result of a physical, sensory, communication, intellectual or mental impairment if the limitation:

  • Has lasted or has a prognosis of lasting more than a year; and
  • Is diagnosed by a duly registered medical practitioner in accordance with the criteria prescribed by the Commissioner

In order to benefit from the full disability-related medical expenses provisions, you'll need to have an ITR-DD (confirmation of diagnosis of disability form for an individual taxpayer) form completed by a registered medical practitioner.

Age and Disability Status

Formula Used to Calculate Additional Medical Expenses Tax Credit

Under 65, No Disability

25% of:
Total contributions paid to the medical scheme
Less (4 x Medical Scheme Fees Credit)
Plus (Qualifying medical expenses paid less 7.5% of taxable income)

Under 65, Disability

33.3% of:
Total contributions paid to the medical scheme
Less (3 x Medical Scheme Fees Credit)
Plus (Qualifying medical expenses paid)

65 or Over, With or Without Disability

33.3% of:
Total contributions paid to the medical scheme
Less (3 x Medical Scheme Fees Credit)
Plus (Qualifying medical expenses paid)


Let's look at a worked example - including the Medical Scheme Fees Credit - to show the different steps in the calculation.

Samson is 40 years old and pays R4,000 a month to a medical aid fund for himself, his wife and their 2 children. His youngest child had been quite ill throughout the year and by 29 February 2016, he'd paid R20,000 for medical treatments that had not been claimed back from his medical aid as his savings had run out. Samson's taxable income for the year was R250,000.

First, we need to work out what Samson's Medical Scheme Fees Credit is. Remember this is the flat rate of R286 each for him and his first dependent (his wife) plus R192 for each of his additional dependents (their children) so it's a fairly uncomplicated sum.

Annual medical scheme fees credit = Monthly credits x 12
[(R286 x 2) + (R192 x 2)]x 12
= [(R572) + (R384)] x 12
= R956 x 12
= R11,472

Now let's calculate the excess scheme fees by applying the formula for someone under 65 years old without a disability.

Excess scheme fees credit = Total contributions – (4 x medical schemes credit)

(R4,000 x 12) – (4 x R11,472)
= R48,000 - R45,888
= R2,112

Next we need to determine the qualifying medical expenses by subtracting 7,5% of Samson's taxable income from his total out-of-pocket medical costs.

Qualifying medical expenses = Total qualifying spend – (Taxable Income x 7,5%)
R20,000 - (R250,000 x 7,5%)
= R20,000 – R18,750
= R1,250

Remember the additional medical expenses credits is 25% of the sum of excess fees and qualifying medical expenses, so let’s work that out.

25% x (R2,112 + R1,250)
= 25% x R3,362
= R840 (50c has been rounded down for the sake of simplification)  

Lastly, let’s add the Medical Scheme Fees Tax Credit to the Additional Medical Expenses Tax Credit to see what amount Samson can deduct from his total tax obligation for the year.

Medical Scheme Fees Tax Credit + Additional Medical Expenses Tax Credit
= R11,472 + R840
= R12,312

Samson has a medical tax credit of R12,312.

We can also show this calculation in the following way:

 

Contribution / Expense

Calculation

Tax Credit

Medical Scheme Fees Credit

Step 1: Medical Scheme Fees Credit

R4,000 per month for himself, his wife and their 2 children

Monthly credits x 12
[(R286 x 2) + (R192 x 2)] x 12
= [(R572) + (R384)] x 12
= R956 x 12
= R11,472

 

R11,472

Additional Medical Expenses Tax Credit

Step 2a: Excess Medical Scheme Fees

R4,000 per month

Total contributions - (4 x Medical Scheme Fees Credit)
(R4,000 x 12) - (4 x R11,472)
= R48,000 - R45,888
= R2,112

 

Step 2b: Qualifying Medical Expenses

R20,000 for the year

Total qualifying spend - (Taxable Income x 7,5%)
R20,000 - (R250,000 x 7,5%)
= R20,000 - R18,750
= R1,250

 

Step 3: Additional Medical Expenses

 

25% x (Excess Medical Scheme Fees + Qualifying Medical Expenses)
25% x (R2,112 + R1,250)
= 25% x R3,362
= R840 (50c dropped for the sake of simplification)

R840

Total Medical Expenses Tax Credit

Step 4: Total Medical Expenses Tax Credit to be applied

 

Medical Scheme Fees Tax Credit + Additional Medical Expenses Tax Credit
= R11,472 + R840
= R12,312

R12,312


All credit values and calculations are based on the 2016/2017 tax year, i.e. 1 March 2016 to 28 February 2017.  If you're completing tax returns for other tax years different amounts, limits and conditions may apply.

Follow the above formulas to calculate your medical aid tax credit, or use our handy Medical Aid Tax Credit Calculator that will do it all for you in a matter of moments. 



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