Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Tax treatment of salary received to provide support in home for a person with mental disabilities.
Position: Not taxable if conditions in paragraph 81(1)(h) of the Act are met and no expenses are deductible. Otherwise included in computing employment income and expenses deductible as permitted by section 8 of the Act.
Reasons: Paragraph 8(1)(h) and Section 8 of the Act.
xxxxxxxxxx 992132
Wm. P. Guglich
October 15, 1999
Dear XXXXXXXXXX:
Re: Deductibility of Expenses
This is in reply to your letter dated July 19, 1999, requesting our views regarding the deductibility of certain expenses incurred.
You indicate that you are a part-time employee with the XXXXXXXXXX. You provide residential support in your home to a young woman with mental disabilities. She lives in your home and has her own bedroom, bathroom and full access to the rest of the house. You assist her with daily living skills and provide her transportation to her employment day program and the various other activities that she is involved with in the community.
Briefly, your annual service contract requires that you provide supervision, instruction, guidance and training so that the young woman may acquire the life skills and maturity necessary for eventual independent or semi-independent living.
You receive a monthly salary to provide service but are not reimbursed for any expenses (e.g., transportation). You requested our views as to whether certain expenses you have incurred are deductible.
The expenses which are deductible is dependent on the nature of the payments you are receiving (i.e., whether the payments are employment income or, social assistance payments received on behalf of the young woman). The determination of the nature of the payments you are receiving is a question of fact, and all the facts and circumstances surrounding your particular situation have to be examined before a final determination can be made.
Paragraph 81(1)(h) of the Income Tax Act (the "Act") exempts from inclusion in income of an individual certain social assistance payments received by the individual, if all of the following conditions are met:
1. The payments must be ordinarily made on the basis of a means, needs, or income test.
2. The payments must be made under a program provided for by federal or provincial law.
3. The payments must be received directly or indirectly by the individual for the benefit of another individual (hereinafter referred to as the "cared-for individual").
4. The cared-for individual cannot be the individual's spouse or related to the individual or the individual's spouse.
5. No family allowance under the Family Allowances Act or any similar allowance provided for by provincial law can be payable in respect of the cared-for individual for the period for which the social assistance payment is made.
6. The cared-for individual must live in the individual's principal place of residence; or the individual's principal place of residence must be maintained for use as the cared-for individual's residence during the period for which the payments are made.
Where these conditions are met, social assistance payments are not required to be included in computing the income of the individual by virtue of paragraph 81(1)(h) of the Act and no expenses may be deducted.
If it is determined that the exemption under paragraph 81(1)(h) of the Act does not apply to the payments, they would likely be considered employment income. If the payments are considered employment income, subsection 8(2) of the Act limits the deduction of expenses from employment income to those specifically permitted by subsection 8(1) of the Act. In regard to your concerns about travel expenses you may claim, Interpretation Bulletin IT-522R, Vehicle Travel and Sales Expenses of Employees (copy attached) discusses vehicle and travel expenses of employees.
For further assistance in determining the nature of the specific payments you are receiving and the expenses that you may be permitted to deduct, please contact the Client Assistance Division at the XXXXXXXXXX Tax Services Office XXXXXXXXXX.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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