Is Travel Insurance Tax Deductible in Canada?
Tax seasons are not a favourite for many. For most, getting assistance from a qualified accountant is the go-to option. However, understanding your tax payments and claims is paramount. If you love to travel, you probably have started exploring travel medical insurance options. And you may already have a ton of quotes from different travel insurance providers. For example, if you like travelling by boat, you can get quotes for boat insurance in Alberta and boat insurance in Red Deer.
Confused about whether to claim your travel insurance costs when filing your income tax? Well, we will break it all down for you, so be sure to have a copy of your travel insurance documents for the income tax filing. You never know, you could save some money on your travel insurance in the next tax season!
Is travel insurance eligible for tax credits?
Travel insurance is expensive. Whether travelling for a short trip, an extended holiday with the family or are suffering from pre-existing medical conditions, anyone will tell you one thing. NEVER make travel plans without the necessary insurance. Luckily, you can recoup part of the travel medical costs via the CRA Medical Expense Tax Credit. These tax credits pave a way for travellers to cut down on their tax liability. However, one must meet certain requirements to be eligible for a claim.
What are the travel insurance tax deduction provisions in Canada?
- You can only claim travel medical costs. This eliminates other travel insurance-related claims such as travel interruption, cancellation or even baggage insurance. You may have travel insurance that provides coverage for all travel-related perils. However, the only amount that can be claimed for a refund is that which is related to the medical costs that will be incurred during the travel period. This also applies to other eligible uninsured medical expenses that a traveller incurs when travelling outside Canada.
- Travellers can claim medical expenses incurred outside and inside Canada. However, you MUST NOT have received reimbursement for the expenses. For instance, if you have an insurance policy, your insurer must not have reimbursed the extra medical expenses incurred.
- Employed persons cannot make claims on health benefits received by the employer which are reimbursed to the said person. However, if the insured incurred travel medical costs out of pocket, then they can file a tax claim.
- Medical costs paid to a private health services plan for a spouse, self or anyone connected by blood can be claimed on the income tax.
- You will be required to provide documents that show proof of your medical travel insurance to CRA. This will show the cost of the premium and the eligibility of the policy for a tax credit. As such, you should ensure you safely store the travel medical insurance receipt if you plan on making a claim.
- You will not receive the medical travel expenses in full in the tax credit. The Canadian government only reimburses part of the travel medical expenses.
- The Canadian government only offers tax credits for medical expenses up to a minimum dollar value threshold.
- If an employer makes contributions for the employees to a private health services plan, the employees will not be granted any taxable benefit, meaning that they can not make a claim. However, if an employee pays medical premiums to a private health services plan, the costs qualify as medical expenses. As such, the employee can claim the travel costs and reap the tax deduction benefits.
Want to have a stress-free travel experience? Here are some common travel insurance mistakes to avoid.
- Not disclosing your true health status- Most travel insurers do not provide coverage for pre-existing conditions. If you receive treatment for a pre-existing condition that was not declared, your insurer may decline your claim or even cancel your policy. This may also make it difficult to claim a tax refund on the amount of out-of-pocket expenses incurred.
- Purchasing a travel insurance policy based on price as opposed to coverage- Travel insurance can be expensive. Most travellers often make the mistake of purchasing a policy based on the pricing and ignore the coverage. Given that cheaper insurance plans may not provide sufficient coverage, always be on the lookout for the deductible amounts and reimbursement amounts.
- Failure to scrutinize the policy’s exclusions and limitations- Insurance policies have coverage exclusions and limitations. For instance, your travel insurance may not provide coverage for some sporting activities such as parachuting. To avoid getting unpleasant surprises when making claims, ensure you discuss your travel plans with your insurer and get clarification on the coverage provided.
- Failure to purchase coverage for the entire duration of the trip- Travel insurance should provide coverage for the entire trip. While it is not wrong to extend the duration of your trip, ensure you contact your insurer and inform them of the travel dates changes.
- Travelling to a different province in Canada without travel insurance- Most Canadian residents ignore the fact that provincial health insurance does not provide coverage for all emergency medical care costs when outside your province. For instance, ambulance and prescription drugs are not covered under the provincial health insurance plan, meaning that you will be required to pay out of pocket if need be.
- Relying only on free travel insurance coverages- You may have travel insurance included in your credit card, bank account or even your group insurance. However, take time to understand the coverage provided. Most free insurance plans provide the least coverage and are, in most cases, not suitable for travel plans, especially without another travel insurance plan.
- Purchasing travel insurance too late- Travel insurance is often forgotten when making travel plans. Buying travel insurance too late may limit a traveller from comparing quotes from other insurance. When purchased late, you are most likely to pay exorbitant rates.
While you will not receive the full travel expenses incurred when you make a tax claim, you can still save some money on your medical travel expenses. Tax claims can be uncertain. However, remember it is always wise to claim and receive no reimbursement than not to claim at all and miss out on a refund. If you are planning on making a claim, always ensure you have your papers, receipts and any other vital information that may be required.