2019-0791601E5 METC & HATC for a dependant

Principal Issues: Whether an individual is entitled to (i) the home accessibility tax credit and (ii) medical expense tax credit in respect of expenses incurred for his adult son who is XXXXXXXXXX?

Position: Question of fact.

Reasons: (i) If the individual is a qualifying individual for purposes of the HATC, up to $10,000 of the expenses may be eligible. General comments provided. (ii) If the son is a dependant of the individual, some of the expenses could be eligible for the METC. General comments provided.

Author: Wirag, Eric
Section: 118.2; 118.041; 118(6)

XXXXXXXXXX                                                                                                                                           2019-079160
                                                                                                                                                                   Eric Wirag, CPA, CMA
May 6, 2019

Dear XXXXXXXXXX:

Re: Home Accessibility Tax Credit and Medical Expense Tax Credit

This is in reply to your letter of January 1, 2019 regarding the home accessibility tax credit (HATC) and medical expense tax credit (METC).  You have provided a list of various expenses incurred and have asked the following:

1.    Whether you or your wife can claim any of the expenses incurred for the home accessibility tax credit?

2.    Whether the expenses incurred are eligible for the medical expense tax credit?

3.    When should you provide supporting documentation for amounts claimed for either credit?

We understand that these expenses were incurred on XXXXXXXXXX.  His condition has resulted in him being wheelchair bound and he requires the assistance of caregivers. You explain that he has been approved for the disability tax credit.  As a result of his circumstances, you state that he is no longer able to work.

We understand that your son lives at home with XXXXXXXXXX.  You do not live together with them.  His condition has required significant changes to his home in order to make it accessible for him.  You explain that you and your wife have paid for many of these expenses as the costs were significant, and their family income is not sufficient to support all of these additional expenses.

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced).  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 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Home accessibility tax credit

The HATC allows “qualifying individuals” or “eligible individuals” to claim “qualifying expenditures” paid for “qualifying renovations” made to the individual’s “eligible dwelling” in Canada. The terms qualifying individual, eligible individual, qualifying expenditure, qualifying renovation, and eligible dwelling are all defined in the Act.  Up to $10,000 in qualifying expenditures can be claimed in a given tax year, which results in a tax credit of up to $1,500 for that year.

In general, to be a qualifying renovation eligible for the HATC, the renovation must enable the qualifying individual to gain access to their home, be mobile or functional in their home, or reduce the risk of harm within (or in gaining access to) their home. The renovation must be enduring and integral to the home.

Qualifying expenditures must be directly attributable to a qualifying renovation. Examples of qualifying expenditures include expenditures relating to wheelchair ramps, walk-in bathtubs, wheel-in showers and grab bars. Qualifying expenditures include the cost of labour and professional services (for example, electricians, plumbers, carpenters and architects), building materials, fixtures, permits, and equipment rentals used in the course of the qualifying renovation.

Expenses for annual, recurring or routine repairs or maintenance, housekeeping, gardening, etc., will not be eligible for the HATC. In addition, expenses are also excluded to the extent that they can reasonably be considered to have been reimbursed, otherwise than as assistance from the federal or a provincial government including a grant, subsidy, forgivable loan or a deduction from tax.

In our view, where the main purpose for incurring an expense is to undertake a qualifying renovation, the expense will not cease to be a qualifying expenditure for the sole reason that it may increase the value of the eligible dwelling. Conversely, where the main purpose for incurring an expense is to increase or maintain the value of the eligible dwelling, such an expense would not be considered a qualifying expenditure for the purpose of the HATC.

If your renovation expenses qualify for the medical expense tax credit, you can claim both the HATC and the medical expense tax credit for these expenses.

A qualifying individual is an individual who is eligible for the disability tax credit for the year or is 65 years of age or older at the end of a year.

An eligible individual in respect of a qualifying individual (who is not 65 years of age or older), is either:

*     the qualifying individual's spouse or common-law partner in the year; or

*     an individual who is entitled to claim the disability amount for the qualifying individual or would be entitled to claim the disability amount if no disability amount was claimed for the year by the qualifying individual or the qualifying individual's spouse or common-law partner.

Where the spouse or common-law partner of the qualifying individual is claiming the disability amount or any other non-refundable tax credit (other than medical expenses), such as the spouse or common-law partner tax credit, in respect of the qualifying individual, another individual is not entitled to claim the disability amount for the qualifying individual.  Thus, only the spouse or common-law partner of the qualifying individual could be an eligible individual in respect of the qualifying individual for the HATC when the spouse claims a non-refundable tax credit in respect of the qualifying individual. Where the spouse or common-law partner of the qualifying individual does not claim a non-refundable tax credit in respect of the qualifying individual, then if another individual is entitled to claim the disability amount, as described above, they could be considered an eligible individual in respect of the qualifying individual.

Medical expense tax credit

In general, an individual may claim the METC in respect of eligible medical expenses incurred in respect of the individual, the individual's spouse or common-law partner, or a dependant of the individual (collectively referred to below as the “patient”).  For the purposes of the METC, a “dependant” of an individual for a taxation year includes a child who is 18 years of age or older who at any time in the year is dependent on the individual for support.  The individual may only claim the eligible medical expenses in respect of the dependant that exceed the lesser of 3 per cent of the dependant's income for the year and an indexed dollar threshold.

Whether a person is dependent upon the individual for support is a question of fact. In general terms, support involves the provision of the basic necessities of life such as food, shelter and clothing, on a regular and consistent basis. This support may be given voluntarily or pursuant to a legal commitment.  Where the person has income during the year, it would have to be shown that this income was insufficient to meet their basic needs and that they had to rely on the support provided by the individual. In this regard, consideration would also be given to the amount of support provided by the individual.

Medical expenses that are eligible for the METC are limited to those described in the Act. If a particular expenditure is not described as an eligible medical expense in the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure is not eligible for purposes of the METC. This is the case even though the expenditure may have been incurred for medical reasons.

An individual cannot include as an eligible medical expense, any expense to the extent that the individual or certain other persons, such as a person related to the individual, are entitled to be reimbursed for the expense. There is an exception to this rule to the extent that the amount of the reimbursement is required to be included in computing income and is not deductible in computing taxable income.

It is a question of fact whether any particular medical expense is an eligible medical expense for purposes of the METC.  Although we cannot provide a determination of eligibility of each expense which is listed in your letter, we can provide the following general comments to aid you in making your determination.

Renovation expenses

An individual is allowed to claim as eligible medical expenses, reasonable expenses relating to renovations or alterations to a dwelling of the patient who lacks normal physical development or has a severe and prolonged mobility impairment. To claim renovation expenses under this provision, the following conditions must be met:

a)    the expenses were paid to enable the patient to gain access to his or her dwelling or be mobile or functional within it;

b)    the expenses would not typically be expected to increase the value of the dwelling; and

c)    the expenses would not normally be incurred by persons who have normal physical development or who do not have severe and prolonged mobility impairment.

The types of renovations and alterations contemplated under the Act include such items as the cost of installing entrance and exit ramps, widening doorways, lowering shelves, kitchen or bathroom cabinets, moving electrical outlets, and installing a custom built shower with appropriate grab bars and seat. Reasonable expenses pertaining to a particular renovation or alteration may include payments to an architect or a contractor.

If the renovations include specific renovations or alterations that would not be made by a person who has normal physical development or who does not have a severe and prolonged mobility impairment, then reasonable expenses relating wholly to such specific renovations or alterations could be claimed, provided they are not of a type that would typically be expected to increase the value of the dwelling. The onus is on the individual to prove that the conditions of paragraph 118.2(2)(l.2) of the Act have been met.

Lifts and mechanical devices or equipment

If the cost of the lifts identified in your list do not satisfy the criteria for renovation expenses as described above, the Act provides a list of specific devices or equipment that may also qualify as eligible medical expenses.  This list provides for specific devices or equipment and their required use for eligibility for the medical expense tax credit.  The devices or equipment must also be prescribed by a medical practitioner to be eligible.

Included in this list are the following qualifying devices:

*     power-operated guided chair installation, for an individual, that is designed to be used solely in a stairway;

*     Mechanical device or equipment designed to be used to assist an individual to enter or leave a bathtub or shower or to get on or off a toilet; and

*     Power-operated lift or transportation equipment designed exclusively for use by, or for, a disabled individual to allow the individual access to different areas of a building or to assist the individual to gain access to a vehicle or to place the individual's wheelchair in or on a vehicle.

If any of the expenditures incurred meet the above noted requirements, including that the device or equipment is prescribed by a medical practitioner, the amounts would be an eligible medical expense for purposes of the medical expense tax credit.

Accommodation expenses during renovations:

Reasonable travel expenses, including reasonable expenses for meals, accommodations and parking, may be eligible medical expenses.  These expenses must be incurred in respect of the patient and up to one individual who accompanied the patient (where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling without the assistance of an attendant).  These expenses must be incurred to obtain medical services in a place that is not less than 80 km from the locality where the patient dwells, where substantially equivalent medical services are unavailable within the patient’s locality.

Reasonable moving expenses may be claimed if they are incurred to move a patient to a dwelling that is more accessible or is more mobile or functional.

Based on your description of the expenses for hotel accommodation incurred during the renovation, it appears that these expenses will not be eligible for the METC.

You can find information regarding the additional expenses you listed in Guide RC4065, Medical Expenses 2018 which can be found on www.Canada.ca.

You do not need to send any supporting documents when filing your tax return. Keep them in case we ask to see them later.

We trust our comments will be of assistance.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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