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Medical Expenses & Tax

Posted under Guides

Private medical treatment is increasingly pushing the limits of medical aid scheme benefits and our own wallets. However, it's an outlay that few of us can avoid. Luckily, certain medical expenses may come with a bit of tax relief in the way of tax credits.

A tax credit is a deduction off your tax payable. This means that your contributions to a medical aid, as well as a portion of your ‘qualifying expenses’ (certain 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 standalone refund from SARS. This means that if you don’t earn an income, but do contribute to a medical aid, you can’t claim the medical credit. SARS does not give money back unless tax has been paid already.

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, it’s likely that 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

Here’s a handy list of who SARS considers dependents:

  • spouse(husband, wife or same sex partner)
  • 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 like 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



Medical tax credits


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 dependent/s. The credit (for 2020) is a fixed monthly amount of R310 for you as the primary member, a further R310 for your first dependent and R209 for each of your additional dependents.

Example

If John pays for medical aid for himself, his wife and his three children, his monthly tax credit will be calculated like this:

   R310 for John
+ R310 for John's wife
+ (R209 x 3) for his 3 children
 = R1 247 tax credit per month

John's tax liability is therefore decreased by R1 247 per month. Note that this is a flat rate per month and doesn’t take his taxable income into consideration.


If you're paying your contributions via your employer (as a deduction from your salary or wages), your employer is obliged to use the credit system to reduce your monthly PAYE tax. If you pay medical aid independently of your employer however, your monthly PAYE won’t be adjusted, and you’ll therefore end up overpaying tax (which you’ll be able to claim back as a refund when you submit your annual tax return).

Additional Medical Expenses Tax Credit

The Additional Medical Expenses Tax Credit is in place to provide some credit for excess medical expenses and is made up of two parts:

  1. Excess medical aid contributions, and
  2. Qualifying medical expenses /Out-of-pocket medical costs (i.e. those not reimbursed or claimed from medical aid), which you pay for yourself.

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

Out-of-pocket expenses are a bit more complex. Out-of-pocket medical costs, as per SARS, are those qualifying medical expenses that you’ve paid for yourself, which have not been reimbursed by 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 that this won't include expenses you paid for but didn't submit to medical aid - you'll have to add 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 for the services of 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 - like cough syrups, headache tablets or vitamins - don't qualify as medical expenses that are taken into account for tax purposes, unless they’re specifically prescribed by a registered medical practitioner and acquired from a pharmacist. Now that we know what qualifies as medical expenses you can claim back, let’s look at how you work out your additional medical expenses tax credit.


How to calculate your Medical Tax Credit

The formula you need to use depends on two factors:

  1. Your age - whether you're older or younger than 65, and
  2. 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 form (confirmation of diagnosis of disability form for an individual taxpayer) completed by a registered medical practitioner within the last five years. See more details on disability costs in the next section.

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)

Example

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 R5000 a month to a medical aid fund for himself, his wife and their two children. His youngest child had been quite ill throughout the year and by 28 February 2019, he'd paid R25 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 R360 000.

First, we need to work out what Samson's Medical Scheme Fees Credit is. Remember that this is the flat rate of R310 each for him and his first dependent (his wife), plus R209 for each of his additional dependents (their children), so it's a fairly uncomplicated sum.

Annual medical scheme fees credit = Monthly credits x 12


   [(R310 x 2) + (R209 x 2)] x 12
= [(R620) + (R418)] x 12
= R1104 x 12
= R12 456

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)

   (R5000 x 12) – (4 x R12 456)
= R60 000 – R49 824
= R10 176

Next, we need to determine the Additional Medical Expense Credit by subtracting 7.5% of Samson's taxable income from his total out-of-pocket medical costs, plus the excess schemes credit.

Additional Medical Expenses Credit = (Total qualifying spend + excess schemes credit) – (Taxable Income x 7,5%)


   (R25 000 + R10 176) - (R360 000 x 7,5%)
= R35 176 – R27 000
= R8176

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

25% x R8176
= R2044 

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

= R12 456 + R2044
= R14 500

Samson has a medical tax credit of R14 500.

We can also show this calculation in the following way:

Example

 

Contribution / Expense

Calculation

Tax Credit

Medical Scheme Fees Credit

Step 1: Medical Scheme Fees Credit

R5000 per month for himself, his wife and their two children

Monthly credits x 12 
[(R310 x 2) + (R209 x 2)] x 12 
= [(R620) + (R418)] x 12 
= R1038 x 12 
= R12 456

 

R12 168

Additional Medical Expenses Tax Credit

Step 2a: Excess Medical Scheme Fees

R5000 per month

Total contributions - (4 x Medical Scheme Fees Credit) 
(R5000 x 12) - (4 x R12 456) 
= R60 000 - R49 824
= R10 176

 

Step 2b: Qualifying Medical Expenses

R25 000 for the year

Total qualifying spend plus Excess Medical Schemes Fee - (Taxable Income x 7,5%)
= (R25 000 + R10 176) - (R360 000 x 7.5%)
= R35 176 - R27 000
= R8176

 

Step 3: Additional Medical Expenses Credit

 

25% x (Excess Medical Scheme Fees + Qualifying Medical Expenses)
25% x R8176
= R2044 

R2332

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
= R12 456 + R2044= R14 500

R14 500

 

All credit values and calculations are based on the 2018/2019 tax year, i.e. 1 March 2018 to 28 February 2019.  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 which will do it all for you, in a matter of seconds.

 

Disability 

As mentioned earlier, you’re also allowed to take into account qualifying physical disability expenditure when computing your medical tax credit. This is over and above any qualifying contributions made to medical schemes and qualifying medical expenses incurred and paid.

A physical disability can be described as a condition or dysfunction, of a permanent nature, which requires the person who has the condition or dysfunction to use special equipment or receive medical treatment in order to perform general life functions. A temporary condition or illness that can be treated with, for example, medication or exercise, is not regarded as a physical disability. It’s not a requirement that the condition result from physical injury.

The expense must be directly because of a physical disability suffered by you, your spouse, your or your spouse’s children, or any of your dependants. Expenditure incurred in respect of a dependent will only qualify if –

  • you were a member of a registered medical scheme; and
  • at the time the expense was paid, the person was admitted as a dependant of yours in terms of the rules of the medical scheme.

Taxpayers must ensure that the following information is available:

  • Full details of the nature of the physical disability.
  • Evidence that the expense was incurred “in consequence of” the physical disability, that is, directly connected with the physical disability and/or incurred as a necessary result of it.
  • Why was it necessary to incur the expense? Was the expense inevitable, or unavoidable, in such a way that it cannot be otherwise, of necessity?
  • Completed ITR-DD Confirmation of Diagnosis of Disability form
  • Proof of payment for treatments, prescriptions etc.

Medical aid source codes

Below is a list of the main medical source codes, together with a description, that you’ll see on your tax return:

3810: Medical aid fringe benefit

If your employer contributes to a Medical Aid on your behalf, their portion will be included on your IRP5 as a fringe benefit in the income section. This means that you’ll get taxed on the employer amount which is paid for you. Just think of it as part of your salary package.

4474: Employer’s medical aid contributions

If your employer contributes to a Medical Aid on your behalf, their portion will be included on your IRP5 as a deduction.

4005: Medical Aid Contributions

This is the total contributions you made to the Medical Aid – if you contribute via your employer, it will include both your employer and employee contributions and it will appear on your IRP5 in the deductions section. You will also need to enter this amount in the Medical section of your ITR12.

4116: Medical Schemes Fee Tax Credit

This is the fixed monthly tax credit you receive for yourself and each additional dependent on your medical aid policy. If you contribute via your employer, this amount will reflect on your IRP5.

4020: Medical expenses paid by you personally, that appear on your medical tax certificate

These are medical costs that you submitted to your medical aid that were not reimbursed. The amount will reflect on your medical tax certificate and you need to enter it in the relevant field in your tax return.

4023: Disability expenses

If you, or any of your dependents have a disability, you need to report to SARS the expenses you incurred that were directly linked to the disability, that were not reimbursed by your Medical Aid.

4034: Expenses not reflected on any medical certificate

These are qualifying medical expenses paid by you personally and not submitted to the medical aid. You need to tell SARS about these too in your tax return, as they are entered into the formula to determine your medical aid tax credit.

 

Supporting Documents for medical expense claims

Supporting documents are required to complete the medical aid section of the tax return. Below we discuss in detail the list of documents and information that may be required for you to claim back your medical expenses.

Medical Schemes Fee Credit

If you contribute to a medical aid, you’ll need to submit your medical aid tax certificate to SARS in order to claim your fixed monthly credit. You’ll find more details on how to get this certificate in the next section.

Out of Pocket Medical Aid Expenses

If you paid for medical expenses personally (i.e. these were not reimbursed by the medical aid) you will need to provide supporting invoices and receipts to SARS.

Disability expenses

Besides the duly completed ITRDD , you will also need to provide all supporting invoices and receipts to SARS.

 

Where can I get my Medical Scheme Tax Certificate?

This certificate details exactly how much was paid to the medical aid for yourself and your dependents over the course of the tax year (1 March to 28/29 Feb). It also details how much money you paid for other medical expenses, such as medicines and doctors’ expenses, which you claimed for, but your medical aid did NOT cover. This information is important for your tax return and the information included can improve your chances of getting a tax refund when you submit.

Your medical scheme provider is supposed to send your tax certificate to you by email or post by July, but if they haven’t done it yet, you can ask for it directly. Most medical aid providers offer a self-service portal online where you can login and download your tax certificate. Others have a call centre that you can phone and ask that they post or email your tax certificate to you.

Select your medical aid / medical scheme below to get your tax certificate:

Discovery Healthwebsite
Bonitaswebsite
Momentum Healthwebsite
Fedhealthwebsite
GEMSwebsite
Liberty Medical Schemewebsite
Medihelpwebsite
Bestmedwebsite
Sizwe Medical Fundwebsite / call 0860 100 871
Polmedwebsite / call 0860 765 633
Selfmedwebsite
Spectramedwebsite / call 0861 497 497

 

Navigating around your medical certificate

If you belong to a Medical Aid, there is important information on your medical aid tax certificate which needs to be included in your tax return. This will ensure you receive the medical aid tax credit that is due to you.

Do you belong to any of the below medical aids?

If yes, click on the relevant link and let us guide you around your medical aid tax certificate!




FAQ:

 

Can I claim GAP cover?

No - GAP cover is treated as short term insurance and not medical cover, which means it’s not claimable for tax purposes and therefore you can’t include it as part of your qualifying medical expenses.

 

Can I claim medical aid expenses I pay for my parents?

Yes, you can - in the opening questions of your Tax Return, you need to answer "yes" to the question asking if you pay medical expenses (including medical aid where you are not the main member) in respect of a dependent. The medical section of the return will then open up a section which will allow you to enter these medical aid details and/ or medical expenses you pay on behalf of your parents. For medical aid payments, you would only be able to claim this credit if you directly paid the medical aid from your bank account. 

If SARS does request proof, you need to supply them with a Medical Aid contribution certificate from the medical provider / scheme, along with proof of payments as well as a letter indicating why you’re making payment for someone else and whether they’re financially dependent on you. If applicable, you’ll also need to supply medical invoices and receipts.

 

I pay for medical aid, but my wife is the main member - how do I claim?

Since your wife is the main member of the medical aid, it would be simpler for her to claim the medical credit in her tax return. However, if you’re willing to gather all the paperwork for SARS, it should be possible for you to claim the medical credit yourself, instead of your wife.

In the opening questions of your Tax Return, you need to answer "yes" to the question asking if you pay medical expenses (including medical aid where you’re not the main member) in respect of a dependent. The medical section of the return will then open up a section which will allow you to enter these medical aid details. If SARS does request proof, you need to supply them with the Medical Aid contributions certificate from the medical provider / scheme, along with proof of payment, as well as a letter indicating why you’re making payment where you’re not the main member and whether your wife is financially dependent on you.

 

I pay my husband for my medical aid contribution, but he is the main member - how can I claim my share?

Your husband will need to claim the medical on his tax return as he is the main member of your medical aid. He will get the tax benefit for both of you which would be the same as if you made the claim. Unfortunately, SARS won’t split the benefit and pay out your share to you separately, so you will need to claim your portion of the tax credit back from your husband.

 

Why did I not receive a refund, even though I contribute to a Medical Aid via my employer?

This is because your employer is obligated to adjust your monthly PAYE deductions by the medical tax credit and therefore you’ve already received your medical tax credit during the year (by way of reduced employee’s tax on your salary).

 

I paid for extra medical which was not reimbursed by my medical aid -> why did I not receive a tax benefit?

This is because SARS uses a very complicated formula to calculate whether your Out of Pocket medical expenses will reduce your total tax owing. The calculation depends on the taxable  income you earn and in many taxpayers' cases there actually is no additional medical credit – this is because their qualifying (out of pocket) medical expenses are not high enough and therefore the required threshold is not met in order for an additional medical tax credit to kick in. Please use our handy medical calculator to see what your medical tax credit will be.

 

SARS disallowed all my medical expenses including my expenses that I sent to my medical aid - can I lodge a dispute?

As long as the return was not filed more than three years ago, yes you can definitely lodge a dispute and attach a schedule of your medical expenses and the proof of payment of each expense, along with their invoices.


I changed medical aids during the tax year, can I only claim for one?

You should declare both medical aids on your tax return to ensure that you get a tax credit for your contributions to both medical aids. Please state on the first section of your medical section that you had more than one medical aid and then enter each medical aid separately. 


I was hospitalised for six months, but my medical aid only covered three months of it. Can I claim the rest of the bill that the medical did not cover as a deduction on my return?

Yes you can, but please ensure that this expense is paid in full, as SARS will need to see the invoices and the proof of payment. 


My son is disabled, and my ex-husband pays all his medical bills and school fees. Can I still claim for it too, seeing as he deducts this from the maintenance?

No, you unfortunately can't claim a deduction for it as the expenses were not paid by you directly. 


Is Medical Insurance also seen as a Medical Aid?

Unfortunately not, medical insurance is quite different to medical aid and not claimable.

Can I claim my hospital plan?

Yes, a hospital plan offered by a registered medical aid company can be claimed for a medical tax credit, exactly the same as a traditional full medical aid.

Are over the counter medicines allowed to be claimed for tax purposes?

No, you can’t claim these. You need to have prescription medicines in order to make a claim for this kind of out of pocket expenditure.