20 March 2001 External T.I. 2001-0067465 - MEDICAL EXPENSE TAX CREDIT

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:

Whether an amount paid as a prepayment for orthodontic work is an amount that qualifies as a medical expense under paragraph 118.2(2)(a) of the Act in the year it is paid.

Position: Question of fact.

Reasons: Provided that the expense is incurred, paid for and receipted in the same "period of 12 months ending in the year", as permitted by subsection 118.2(1) of the Act, the payment will qualify as a medical expense under paragraph 118.2(2)(a) of the Act.

		2001-006746
XXXXXXXXXX 	A. Seidel, CMA
(613) 957-2058
March 20, 2001

Dear XXXXXXXXXX

Re: Prepaid Medical Expenses

This is in reply to your facsimile dated January 26, 2001 in which you requested our views as to whether prepaid dental expenses qualify as a "medical expense" as described in subsection 118.2(2) of the Income Tax Act (the "Act").

The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate district tax services office for their views. However, we are prepared to offer the following general comments which may be of assistance.

For the purposes of computing the tax payable by an individual for a taxation year, the individual is entitled to deduct a "medical expense credit" pursuant to subsection 118.2(1) of the Act.

Paragraph 118.2(2)(a) of the Act provides that a medical expense of an individual includes "an amount paid to a ... dentist ... in respect of ... dental services provided to a person ... who is the individual ... in the taxation year in which the expense was incurred".

In the situation where an individual enters into an arrangement with an orthodontist to pay for orthodontic work on a monthly basis, the amounts paid for the orthodontic work will qualify as a medical expense provided that the monthly payments are made in the taxation year in which the actual expenses are incurred.

Information Circular 70-6R4 may be obtained from your local tax services office or from our Internet web site (www.ccra-adrc.gc.ca).

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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