Recovering from a personal injury at any time is a difficult period for anyone. The pandemic has added further challenges, including loss of employment income and slower resolution of personal injury claims.
For seniors who are recovering from an injury and are living at home during the pandemic, there are some tax considerations to be aware of. Personal injury lawyer Douglas Strelshik speaks with accountant Mark Harendorf of HSM LLP about tax concerns and tips related to medical treatment funding and claiming medical expenses.
Funding Medical Treatment
When you are injured, insurance may not cover (or fully cover) your medical expenses or attendant care while you are waiting for your case to settle. Without insurance coverage, you may find yourself taking out a loan to pay for the cost of medical treatment until your lawsuit is resolved (Treatment Loan).
Whether the interest on the Treatment Loan can be recovered at the end of your lawsuit is unsettled. What is for certain is that interest on the Treatment Loan will continue until the loan amount and interest are paid back.
Injured parties need to understand the amount payable on a loan can be significant by the time their case is resolved. As such, securing a Treatment Loan should be a last resort. As interest on Treatment Loans can be very high, seniors should explore other forms of financing such as a line of credit or mortgage financing.
Douglas: Mark, closure on a personal injury claim can take several years. From a tax point of view, what are some options seniors can consider to fund their medical treatment if they need third party assistance?

Mark Harendorf of HSM LLP
Mark: There are a few alternatives that can be considered. Every client’s situation is different and each has a unique set of facts and circumstances that need to be considered before a decision is made. A few suggested alternatives are:
- Hire a full time attendant. There are detailed rules with respect to claiming the costs of a full time attendant as a medical expense. Seek the advice of your accountant prior to incurring this cost.
- Apply for a reverse mortgage. This is not always the best solution, however given a certain sets of facts and circumstances and the age of the client, a reverse mortgage might be a good alternative.
- Borrow from a family member. Although there is no immediate tax savings for the senior, the cost of borrowing today is relatively low and this could be an easy solution to the problem of funding high medical costs.
Douglas: If a senior doesn’t want to borrow or take money from a third party, can they withdraw funds from their Registered Retirement Income Fund (RRIF) to help pay for their medical treatment?
Mark: A senior can withdraw funds from their RRIF in any amounts and at any time if they so desire. Therefore, the answer is yes; however, it is advisable that they contact their accountant for advice on the matter prior to doing so.
Withdrawals from one’s RRIF are taxable in the year of withdrawal, added to their other income and taxed at their marginal rate of tax. If the interest on the Treatment Loan is determined to be deductible in the year, then the client has lower taxable income giving rise to the availability of withdrawing funds from the RRIF and keeping their taxable income at a level that best suits their tax position. These same RRIF withdrawals could attract a higher rate of tax in the following year when they are not offset by an interest deduction.
Claiming Medical Expenses
Douglas: What should claimants know about tax credits that are available for medical expenses?
Mark: First off, let us quickly differentiate between credits, (which may or may not be refundable) and deductions. A deduction lowers your income dollar for dollar. For example, if your income is $1,000 and you have a deduction of $200, then your taxes payable will be based on applying your marginal rate of tax against the net amount of $800.
A refundable credit (for example, the climate action incentive credit) can result in the government paying out this amount to you regardless of your taxes payable.
Medical expenses are considered non-refundable credits. For example, if you have income of $1,000 and have incurred medical expenses of $2,000 you can only claim enough medical expenses to reduce the $1,000 to $0 (i.e. you cannot go below $1,000 and generate a tax refund, thus the “non” part of the definition).
Qualifying medical expenses must exceed a certain threshold. The threshold is 3% of your net income and is capped at an annual amount of $2,300 (the 2019 amount, which is indexed each year).
The medical expenses to be claimed in a tax year need not be expenses incurred in the calendar year but can be for a twelve-month period which ends in the tax year you are claiming. For example, you can claim medical expenses incurred from say August 1, 2018 to July 31, 2019 on your 2019 income tax return. This can be advantageous if your expenses in the current year are below the 3% threshold but exceed the 3% threshold when added to other expenses incurred in the following year. Due to COVID-19, I anticipate certain taxpayers’ medical expenses to rise during the first half of the 2020 tax year and perhaps make 2019 medical expenses claimable when they may not have been on their own in 2019.
The Canada Revenue Agency (CRA) requires taxpayers to keep their tax documents, including medical bills and receipts for seven years.
Douglas: There was a limit on prescription refills at the beginning of the pandemic. This certainly increases the number of prescription receipts. My office obtains a prescription summary for personal injury cases. With respect to medical bills generally, what do you suggest injured parties or their caregivers do to stay organized in preparation for their tax filing?
Mark: Individuals organize their documents in a variety of ways. Some keep paper files, some scan all documents and maintain computerized records and some have a combination of both.
As a tax preparer, I try to encourage my clients to be organized in whatever fashion they are comfortable with so long as they can provide me with the information I need. This also helps keep their fees down.
With respect to medical expenses, the following information is needed in order to make a claim:
- Date expensed incurred
- Name of patient
- Description of service, i.e. Dentist – Dr. Smith
- Amount of expense
- Date paid (must be paid in the year of claim)
- Amount of insurance reimbursement, if any
Many seniors have multiple prescription receipts. I always encourage clients to go to their pharmacy and ask for a printout of the total prescriptions for the year. These couple of sheets of paper are much easier to deal with then numerous individual receipts that would need to be summarized by the tax practitioner.
Douglas: Are there any other credits or deductions that are specific to seniors that you can highlight for us?
Mark: The tax landscape in Canada seems to get more complicated every year. It is my advice to seek the professional help of an accountant who is best equipped to navigate through the various credits and deductions that may be available to seniors.
A few such items that seniors ought to be aware of when preparing their personal income tax returns are:
- Pension income splitting
- Ontario senior homeowners’ property tax grant
- Disability tax credit
- Home accessibility tax credit
- Canada caregiver credit
Douglas: Mark, thank you for all this insightful information.
For those who are recovering from an injury, we wish you a speedy recovery. For those who are taking care of someone injured, keep well and stay positive and strong.
Mark has practiced accounting at HSM LLP for over 30 years advising clients on a variety of accounting, business and tax related matters. Most recently, Mark has obtained the designation of CDFA®, Certified Divorce Financial Analyst. Mark specializes in providing accounting and tax related advice to clients experiencing a separation and/or divorce. You can reach Mark at 905.470.7090 extension 232 to discuss your specific tax-related questions.
Douglas Strelshik has been representing injured parties in personal injury claims and insurance claims for over 30 years. You can reach Douglas at 647.348.5422 to discuss your specific case.