2021-0917491E5 CPAP - continuous positive airway pressure machine

Principal Issues: Whether the cost of distilled water would qualify as an eligible medical expense for the purpose of the medical expense tax credit, when used to operate a continuous positive airway pressure (CPAP) machine for sleep apnea.

Position: No.

Reasons: While amounts paid for a CPAP machine, including replacement parts, may qualify as an eligible expense under paragraph 118.2(2)(m) of the Act and paragraph 5700(c) of the Regulations, the wording in these provisions is not sufficiently broad to allow for expenses associated with operating the machine.

Author: El-Kadi, Randa
Section: 118.2(2)(i); 118.2(2)(m); Regulations 5700(c)

XXXXXXXXXX                                                                 2021-091749
                                                                                         Randa El-Kadi

September 2, 2022

Dear XXXXXXXXXX,

Re: The medical expense tax credit and distilled water for CPAP machines

We are replying to your correspondence of November 15, 2021, regarding the eligibility of distilled water for the purpose of the medical expense tax credit (METC). The distilled water, in this case, is used to operate a continuous positive airway pressure (CPAP) machine for the treatment of sleep apnea.

You note that in the case of a hearing aid, the cost of batteries used to operate the device is considered an eligible medical expense. Similarly, you ask whether the cost of supplies (distilled water, in this case) used to operate a CPAP machine would also qualify as an eligible medical expense.

Our comments:

This technical interpretation provides general comments about the provisions of the Income Tax Act (the 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 IC70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Under paragraph 118.2(2)(m) of the Act, an amount paid for a device or equipment may qualify as an eligible medical expense if certain conditions are met. Generally, to qualify, the device or equipment must be prescribed by a medical practitioner, must be included in the list of qualifying devices or equipment described in section 5700 of the Income Tax Regulations (the Regulations), and must meet conditions prescribed by the Regulations as to its use or the reason for its acquisition.

Paragraph 5700(c) of the Regulations allows as an eligible device a “device or equipment, including a replacement part, designed exclusively for use by an individual suffering from a severe chronic respiratory ailment […].”

It is a question of fact whether a patient has a “severe chronic respiratory ailment” and whether a particular device was “designed exclusively for use by” such a patient for that ailment. However, based on our understanding of current information about CPAP machines and the indication for their use, it appears that they are designed exclusively for the treatment of sleep apnea. Therefore, assuming that a medical practitioner has prescribed a CPAP machine for use by a patient with sleep apnea, an amount paid to purchase the CPAP machine will likely qualify as an eligible medical expense under paragraph 118.2(2)(m) of the Act and paragraph 5700(c) of the Regulations.

While amounts paid for a CPAP machine, including replacement parts, may qualify as an eligible expense under the provisions mentioned above, the wording in these provisions is not sufficiently broad to allow for expenses associated with operating the machine. Therefore, amounts paid for distilled water to operate a CPAP machine for sleep apnea would not qualify for the METC.

In response to your second question, we note that amounts paid “for, or in respect of, […] an aid to hearing” are specifically provided for in paragraph 118.2(2)(i) of the Act. The words “in respect of” have been interpreted to encompass words of the widest possible scope. Therefore, we have previously taken the position that allowable expenses under paragraph 118.2(2)(i) could include electricity or batteries to operate the device, repairs, maintenance and supplies, among others. This position does not apply to CPAP machines designed exclusively for sleep apnea, given that these devices fall under the ambit of paragraph 5700(c) of the Regulations and are therefore subject to the wording in the latter provision.

We hope that the foregoing comments will be of assistance in clarifying our position.

Yours truly,

Lita Krantz, CPA, CA
Manager
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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