Tutoring and Your Taxes
NOTE: THIS ARTICLE IS OUTDATED. AN UPDATED VERSION HAS BEEN POSTED FOR THE 2018 TAX YEAR AND CAN BE FOUND HERE.
How to Claim Orton-Gillingham Tutoring on Your Personal Income Tax Return
It’s mid-February. Employers are issuing T4s, banks are reminding customers about the RRSP deadline, and personal income tax returns are due in a couple of months. Every year at about this time we start getting questions from parents about if and how our Orton-Gillingham tutoring can be claimed on income tax returns. In the past, we’ve hosted free seminars for parents, with presenter Mike Campagne, an expert on tax relief for those with disabilities, including children with learning disabilities. But this year, so that the important information can be quickly and easily accessed by all Symbols families, I asked Mike if he’d be so kind as to summarize the key points for us in a blog post.
Below, you’ll find the article that Mike wrote for you, our Symbols families. Be sure to scroll to the bottom of the post, as he provides his personal email address and mentions a free consultation. But first, I want to provide my own very high-level overview of the 3 most common ways that our tutoring can potentially be claimed on taxes, to help give Mike’s article a little bit of context.
Children’s Arts Amount
This is the easiest claim to make, in that just about every family is eligible and our Orton-Gillingham tutoring meets the requirements, as long as the student attended Symbols for at least 8 consecutive weeks. Learn more about the Children’s arts amount here on the CRA website.
The eligibility for this option is more difficult and complex. This is the option that Mike primarily focuses on in his article below. Medical expenses are explained on the CRA’s website here, but Mike’s article covers the ins and outs of this option in great detail.
Disability Tax Credit
This option is the most complex and difficult to claim, but when successful, it is also – by far – the most financially rewarding. Mike once told me that the only people who are, without question, automatically approved by the CRA for the Disability Tax Credit are the blind. For others, especially children with learning disabilities, being approved for the Disability Tax Credit can be very difficult and tricky. For Symbols families, I always recommend only attempting this with the help of an expert like Mike, who has successfully helped some of our clients gain approval in the past.
While most of our Symbols families will qualify for Option 1 above, I want to be clear that Option 2 and Option 3 are definitely not available to everyone. Not all of our students have a learning disability (let alone a medically diagnosed learning disability), and the type and severity of the learning disability can limit who will qualify for Options 2 and 3.
More about Mike
Mike Campagne is the founder and President of DTS Disability Tax Services, a company focused on serving families with a child with a non-visible (cognitive) disability since 2006. Mike is a CFP with over a decade of dedicated expertise in disability related tax rules and regulations. The Globe and Mail interviewed him in 2014 as the leading Canadian expert in the field within their extensive landmark report on the growth of private schools serving students with learning disabilities.
From this point onwards on this blog post, all content was written and provided to us by Mike Campagne. Thank you, Mike, for doing this for our students’ families!
This article is not to be construed as financial advice, but rather as general information. Always consult a tax professional in determining the optimal way for you to file your medical expenses or any other relevant tax credits and deductions.
Rob asked me to comment on the claiming of tutoring expenses as a medical expense. I’m starting with the specific rules, and then bolding key areas in which opportunities exist to maximize this tax saving opportunity.
As a general comment, if you have a child with a cognitive challenge requiring tutoring, it would be prudent to get advice from a tax professional with specific and in-depth expertise in the disability area, as it is administered differently than other areas of personal taxation. In the past 5 years numerous tax based credit and benefit programs have been introduced to assist families, and many of these are misunderstood or overlooked by tax preparers with a more general competency.
Specific Rules on Medical Expenses
Line 330 – Medical expenses for self, spouse or common-law partner, and your dependent children born in 1998 or later:
You can claim on line 330 the total eligible medical expenses you or your spouse or common-law partner paid for:
■ your spouse or common-law partner; and
■ your or your spouse’s or common-law partner’s children born in 1998 or later.
You can claim eligible medical expenses paid in any 12-month period ending in 2015 and not claimed for 2014. Generally, you can claim all amounts paid, even if they were not paid in Canada.
Your total expenses have to be more than 3% of your net income (line 236) or $2,208, whichever is less, to yield tax savings.
Reimbursement of an eligible expense – You can claim only the part of an expense for which you have not been or will not be reimbursed.
The medical expense is claimable by the date paid, rather than the date invoiced.
Medical expenses for other dependants must be claimed on line 331. (The most common example of this is a child over 18 living at home).
Line 331 – You can claim the total of the eligible expenses minus either $2,208 or 3% of your
dependant’s net income (line 236 of the income tax and benefit return), whichever is less, to yield tax savings.
The corresponding provincial lines for the medical expense claims are for a child under 18 is 5868, for a child over 18 its line 5872.
Tutoring services that are supplementary to the primary education of a person with a learning disability or an impairment in mental functions, and paid to a person in the business of providing these services to individuals who are not related to the person are eligible medical expenses, so long as a medical practitioner has certified in writing that these services are necessary.
Commentary and FAQs
Why do I need this certified by a medical practitioner?
The simplest way to explain this is to think of it as if your child has been prescribed tutoring due to a learning disability or impairment in mental functions.
Tutoring for a child without such an impairment, is not claimable. However, I would note that in my experience the description of what qualifies as an impairment of mental functions can be relatively broad.
Which parent should make the claim?
Normally it is most advantageous for one parent to claim the entirety of the family’s medical expenses. (There are very rare exceptions when it is advantageous to split medical expenses between parents).
As only the combined medical expenses over $2,208 or 3% of net income result in a tax reduction, in a two parent family often the lower income earner will have the greatest tax reduction.
The corresponding provincial lines for the medical expense claims are for self, spouse and a child under 18 line 5868; for a child over 18 it’s line 5872. The threshold for useable medical expenses differs slightly by province. For BC residents, the threshold is $2,066 or 3% of net income, whichever is less.
For example, with tutoring expenses of $6,000 and spouses with net incomes of $100,000 and $30,000, and no other claimable medical expenses:
The higher income spouse would see useable medical expenses of $3,792 ($6,000-$2,208) versus useable medical expenses of $5,100 ($6,000-$900) for the lower income spouse. By useable medical expenses I am referring to that portion which leads to a tax reduction. For a BC resident, the provincial useable medical expenses would be $3,934 ($6,000-$2,066) for the higher income spouse and the same $5,100 for the lower income spouse.
If you already have medical expenses over $2,208 or 3% of net income, whichever is less, the entire tutoring expense yields claimable tax savings.
Ensure to compare the amount you can claim with the amount your spouse or common-law partner would be allowed to claim. Either parent can make the claim, just choose that claim which leads to the largest tax reduction – run the numbers for both scenarios before filing. Most tax programs will ask you, when you enter medical expenses, whether they are to be “optimized”. Selecting yes normally leads to the tax software working out which spouse should claim the medical expenses, but I recommend do the calculations for each parent to be sure.
In the rare case where neither spouse does pay tax (such as a quite low family income or a high level of deductions), there are no tax savings as the credits are non-refundable. In cases where a family is extremely low income, there may be a medical expense refund claimed, but in my experience families with such low incomes can rarely afford tutoring, so I will not address that issue here.
Are there tax planning opportunities centered around timing of claims in light of overall medical expenses?
Example: Sue is a single Mom who makes $100,000 net income. She plans on having her son Joe, who has a learning disability, have intense tutoring from September to March, cost $3,000 in 2016, $3,000 2017. Sue has no other medical expenses. If she claims the expenses by calendar year, she has a useable medical expense amount of only $792 in each of 2016 and 2017, for a total of useable medical expense above the threshold of $1,584. But if she chooses to claim the period of September 2016 to August 2017 on her 2017 tax filing, her useable medical expense amount more than doubles to $3,792. As well, if she paid the entire tutoring amount in 2016 (a prepayment of the January to March tutoring), Sue would have the $3,792 useable amount for her 2016 filing.
How to meet the CRA requirement of “certified by a medical practitioner”?
Here is a typical letter (optimally on stationary identifying the doctor or registered psychologist) certifying the tutoring is required due to a learning disability or impairment in mental functions:
Joe Sample, date of birth January 1, 2002, is my patient and diagnosed with a learning disability. Due to his learning disability, Joe requires tutoring supplementary to that provided by his primary schooling program.
(Signed Dr.) W. Smith
While a doctor or registered psychologist is the best choice, I have seen CRA accept medical practitioners with less qualifications accepted as long there field is relevant to learning issues.
Will I be audited?
CRA has in some past years set a threshold on medical expense claims for automatic computer generated review (audit is way too strong a term here). Based on filings for clients my best guess is in past years that was set for medical expenses claimed over $5,000, though I think the threshold may have been recently raised to $10,000. These “audits” are usually easily addressed by mailing CRA receipts and a basic letter like the example above. Most regular Canadians can handle this on their own, but if you run into any issues with CRA here, give me a call.
How much tax savings does the claim yield?
This depends on your overall tax situation and other medical expenses. For BC residents this normally works out to 20.06% of the useable medical expense for middle or high income earners (there are exceptions). The maximum tax relief, for a person with substantial other medical expenses above the 3% of net income or $2,208 thresh hold, on $6,000 of qualifying tuition expenses, works out to $1,203.60 for BC residents.
For business owners with a Health and Welfare Trust or Private Health Services Plan, this tax savings can double, but such plans have expenses and requirements, and I know of only a few clients over the years utilizing such a plan – they’re complicated. As a discussion of this component is rarely applicable, I won’t bother to cover the details here. If you are a person owning their own business you may want to review these options online via a google search.
Other Options Beyond Medical Expenses
While claiming eligible tutoring expenses for a child with a learning disability or mental impairment yields valuable tax savings, they are barely the tip of the iceberg of what may be available. There are a range of potentially applicable programs that include: the disability tax credit, child disability benefit supplements to the child tax benefit, supplementary arts credits, supplementary fitness credits, family caregiver amount credits, and tuition medical expense credits for a limited list of approved private schools.
Not every child with a learning disability or impairment will qualify for such programs – but many do. These programs are complex and pre-assessed with a rigorous CRA testing system that often leads to erroneous denial of tax credits and benefits to Canadian families. DTS has served numerous clients denied such credits and benefits, in 2014/15 alone winning over 90% of appeals in those matters, with an average recovery for clients exceeding $20,000.