2014-0535011E5 Medical expenses - Generator and vehicle expenses

Principal Issues: 1. Whether the cost of an automatic standby generator and vehicle expenses qualify as a medical expense for the purposes of the medical expense tax credit.

Position: 1. General comments provided.

Reasons: 1. It is a question of fact.

Author: Dubis, Robert
Section: 118.2(2); 118.2(2) (l.2); 118.2(2)(l.7); 118.2(2) (k); 118.2(2) (m)

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                                                                                                                                                                              2014-053501
                                                                                                                                                                              Robert Dubis
July 31, 2014

Dear XXXXXXXXXX:

Re: Medical Expense Tax Credit

We are replying to your letter of June 9, 2014, in which you asked for information about the medical expense tax credit (“METC”) in relation to expenses incurred by an individual who has a disabled child with XXXXXXXXXX.

The form and severity of the disease is such that the child requires breathing equipment and transportation to appointments and activities via a special-purpose vehicle. You ask if the cost of purchasing and installing an emergency, whole-house generator to power the breathing equipment (in case of a power outage) or any vehicle expenses qualify for the METC.

Our comments:

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.

Medical expenses which are eligible for the medical expense tax credit (“METC”) are limited to those described in subsection 118.2(2) of the Act. If a particular expenditure is not described as an eligible medical expense in subsection 118.2(2) of the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure does not qualify for purposes of the METC, even though the expenditure may have been incurred for medical reasons.

The Canada Revenue Agency’s general views on medical expenses can be found in the Income Tax Folio S1-F1-C1, Medical Expense Tax Credit, available on our website at www.cra-arc.gc.ca.

Emergency Generator

You have told us that the child requires a ventilator XXXXXXXXXX. The ventilator requires a continuous power supply. To ensure that a continuous power supply is available, the parent is considering installing to an existing dwelling, a permanent, whole home, automatic, natural-gas powered standby generator. In the event of a power disruption, rather than placing the child in hospital for care, the generator would power the child’s breathing equipment, thereby enabling the child to be cared for at home.

Because the generator is designed to be permanently affixed to the dwelling and operate in conjunction with the home’s electrical panel, its installation would most likely be viewed as an alteration to the dwelling for the purposes of the Act. As a result, the acquisition and installation costs must meet the requirements of paragraph 118.2(2)(l.2) of the Act to qualify for the METC. To claim eligible medical expenses under paragraph 118.2(2)(l.2) of the Act, the following conditions must be met:

*     the patient lacks normal physical development or has a severe and prolonged mobility impairment;
*     the expenses were paid to enable the patient to gain access to the dwelling or be mobile or functional within it;
*     the expenses would not typically be expected to increase the value of the dwelling; and
*     the expenses would not normally be incurred by persons who have normal physical development or who do not have severe and prolonged mobility impairment.

For further information, please refer to paragraphs 1.94 through 1.100 of Folio S1-F1-C1 for the discussion of costs related to the alteration of an existing dwelling.

Based on the information provided, it is not clear to us that the installation of a whole-house generator meets all of the requirements.

Vehicle Expenses

You state that transportation to the child’s medical appointments requires the use of a special purpose vehicle and ask if any vehicle expenses qualify for the METC. In this regard, vehicle expenses could encompass operating costs, acquisition costs and modification costs. Where the vehicle is used to transport the child to medical appointments, some vehicle-related expenses could qualify as travel expenses for the METC. Claims for travel expenses must meet the requirements of either paragraph 118.2(2) (g) or 118.2(2) (h) of the Act to qualify for the METC.  Pursuant to these paragraphs, if an individual travels more than either 40 (one way) or 80 kilometres (one way) respectively, to obtain medical services, certain travel expenses could qualify for the METC. You state that the medical appointments are provided in the vicinity of the child’s home. Based on the information provided, all medical appointments appear to be close by and may not meet these minimum travel thresholds necessary to qualify for the METC. For more information, please refer to paragraphs 1.64 through 1.72 of Folio S1-F1-C1.

Part of the cost of the special-purpose van, if it has been adapted for use in transporting a patient who requires the use of a wheelchair, could qualify for the METC, if the expenses meet the requirements of paragraph 118.2(2)(l.7) of the Act. The necessary modifications must have been made at the time it is acquired or within six months after the time it is acquired. To be eligible for the METC, the cost of the modifications must meet the requirements of paragraph 118.2(2) (m) and section 5700 of the Income Tax Regulations, as applicable. Paragraphs 1.109 through 1.112 of Folio S1-F1-C1 discuss the treatment of acquisition, modification and maintenance costs in greater detail. 

We trust our comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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