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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: whether expenses are medical expenses
Position: -no
Reasons: not listed in ITA
XXXXXXXXXX 2001-010245
Denise Dalphy, LL.B.
November 29, 2001
Dear XXXXXXXXXX:
Re: Medical Expenses
We are writing in reply to your letter of September 10, 2001, wherein you enquired whether the costs related to the acquisition, repair, maintenance and operation of a vehicle owned by a senior citizen who has a severe disability (multiple sclerosis) and costs related to the upkeep of that person's rental apartment are deductible for income tax purposes.
Written confirmation of the consequences inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4 the ("Circular"). Where the particular transactions are partially completed or completed, the enquiry should be addressed to the relevant Tax Services Office. Notwithstanding the foregoing, we are providing the following comments.
In order for expenses to be deductible from income, an expense must either be specifically permitted as an expense incurred to earn employment income, or have been directly incurred for the purpose of gaining or producing income from a business pursuant to paragraph 18(1)(a) of the Income Tax Act (the "Act"). In addition, the expense must not be considered a personal or living expense. Personal or living expenses include expenses such as the upkeep of a home or vehicle, etc. If a particular expense is not deductible as an employment or business expense, the Act requires a specific provision to permit a deduction for it. Such is the case with the medical expenses described in the Act, where, subject to certain limitations, the listed expenses may be deducted in computing tax. In connection with motor vehicles and accommodations, the types of expenses that a person is permitted to deduct are limited, and they are described in IT-519R2. See, for example, certain transportation and travel expenses (in paragraphs 31 to 34), certain renovations or alterations to a dwelling (in paragraph 54), and those costs listed in the Appendix to IT-519R2. Although these are personal or living expenses, the Act has specifically allowed for their deduction.
Since the expenses that you have questioned are not specifically mentioned as a deduction in earning employment income, are not usually incurred to earn business income, and there is no specific provision in the Act to permit a deduction from income for these amounts, these personal or living expenses cannot be deducted for income tax purposes. However, as you are likely aware, in addition to the numerous income tax credits that may be claimed for medical expenses (including those mentioned above, as well as others, such as attendant-care expenses, costs of wheelchairs and walkers, costs incurred to make driveways, homes or vans accessible to persons with certain impairments, etc.) the Act provides an income tax credit for persons with a severe and prolonged mental or physical impairment that markedly restricts the individual's ability to perform basic activities of daily living. The maximum amount available for the 2001 year is 16 percent of $6000: the net effect is that it may reduce the amount of income tax payable by a disabled person by up to $960 each year. In addition, the Act provides an income tax credit for persons who are age 65 and over. The maximum amount available for the 2001 year is 16 percent of $3619: the net effect is that it may reduce the amount of income tax payable by a person who is 65 years or older by up to $579.04 each year. Also, unlike medical expenses, no specific expenses need have been incurred by the disabled person, in order to claim the disability credit or by a senior to claim the age credit, and receipts are not required.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of the Circular, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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