Income tax: Deduction of medical expenses

An individual’s ability to pay tax may be adversely affected by costs incurred as a result of illness or disability. For this reason, a certain degree of relief is provided by the Income Tax Act No.59 of 1962 (the Act).

Timing of Deduction

Qualifying medical contributions and expenses may only be claimed in the tax year that they are paid. Expenses can be incurred during a tax year and not paid in the same year. The expenses should only be claimed in the tax year in which it is actually paid.

This guide provides general guidelines regarding the deductibility of medical expenses for income tax purposes. It does not delve into the precise technical and legal detail that is often associated with tax. This guide provides information obtained from our experience in dealing with SARS on a daily basis.

Persons for whom contributions and expenses may be claimed

Only qualifying expenditure paid by the taxpayer for the following persons may be considered in the determination of the medical allowance:

• Yourself
• Your spouse
• Your children
• Your dependents

Important: The patient may be any one of the persons listed above, but the payment must be made by the taxpayer, in order for the taxpayer to be able to claim the medical allowance.

Qualifying contributions to a medical aid

Any contributions paid by you for yourself, your spouse, your children and your dependents, to a medical scheme registered under section 24(1) of the MS Act.

Contributions paid by an employer of a taxpayer, which are included in the taxable income of the taxpayer as a taxable benefit, is deemed to be contributions paid by the taxpayer.

Qualifying medical expenses

Expenses that have been paid by you during the tax year to any duly registered –

• Medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopaedist for professional services rendered and medicines supplied;
• Nursing home or hospital or any duly registered or enrolled nurse, midwife or nursing assistant for illness or confinement;
• Pharmacists for medicines as prescribed by a person mentioned above.

will be taken into account when the medical allowance is determined, provided that the expenses have been incurred for yourself, your spouse, your children or any dependents.

The expenses may not be recovered from your medical scheme.

Documentary requirements to claim a medical allowance

The following documentation must be retained when a medical allowance is claimed for a tax year:

• Proof of contributions paid to a medical scheme.
• A statement from the medical scheme indicating the total amount of claims submitted to the fund that were not refunded to you or paid by the scheme to the service provider.
• A detailed list of all amounts not submitted to the medical scheme or not recovered, with the following details:

1. Date of payment
2. Name of service provider
3. Name of patient
4. Relationship of patient to the taxpayer (if applicable)
5. Amount

• Invoices from service providers for amounts not submitted to the medical scheme or not recovered.
  The invoice should be issued to the taxpayer, but may indicate the patient as the taxpayer’s spouse, children or dependents.
• Proof of payment to the service providers of amounts not submitted to the medical scheme or not recovered. Proof of payment may be a receipt issued to the taxpayer, paid cheques from an account of the taxpayer, bank statements in the name of the taxpayer, bank deposit slips of proof of electronic fund transfer from an account of the taxpayer.

In summary

• Must be a qualifying medical expense,
• Paid by the taxpayer,
• During the tax year,
• Supported by an invoice and proof of payment in the name of the taxpayer

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)