16 December 2002 External T.I. 2002-0167245 - MEDICAL EXPENSES

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 the following expenses qualify as medical expenses:

1) Premium paid under a Health Insurance plan
(HAP-HMO) in the United States
2) Co-insurance amounts paid to a medical practitioner
for doctor appointments
3) The cost of medication
4) Travel costs to obtain injections for the treatment of
hepatitis "C"

Position: General comments provided

Reasons: Limited information provided therefore only general comments provided

XXXXXXXXXX 2002-016724
Shaun Harkin, CMA
December 16, 2002

Dear XXXXXXXXXX:

Re: Technical Interpretation Request: Medical Expenses

This is in reply to your letter of October 1, 2002 regarding the tax treatment of the following expenses that you incurred in 2002 on behalf of yourself, your spouse, or your dependent children for which you have not been and will not be reimbursed:

1) Premium paid under a Health Insurance plan (HAP-HMO) in the United States

2) Co-insurance amounts paid to a medical practitioner for doctor appointments

3) The cost of medication

4) Travel costs to obtain injections for the treatment of hepatitis "C"

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 70-6R5. If, however, 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 general comments.

Our Comments

Section 118.2 of the Income Tax Act (the "Act") provides rules for determining the amount that may be claimed, as a tax credit, in respect of medical expenses. The credit applies to qualifying medical expenses, in excess of defined limits, incurred in any 12-month period ending in the taxation year. A person may claim his or her own medical expenses or those of a dependant or a spouse. However, the amount of the credit is gradually reduced to the extent that medical expenses are incurred for a dependant who has income in excess of the basic personal amount.

HMO Premiums

Generally, paragraph 118.2(2)(q) of the Act provides that a premium, contribution or other consideration paid in respect of yourself, your spouse or a dependent child under a private health services plan ("PHSP") qualifies as a medical expense. Interpretation Bulletin IT-339R2, Meaning of "PHSP", describes the criteria that must be satisfied in order for a plan to be considered a PHSP. In particular, paragraph 4 therein provides:

Coverage under a plan must be in respect of hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense under the provisions of subsection 118.2(2) in the determination of the medical expense tax credit (see IT-519R2 (Consolidated)).

Medical and hospital insurance plans offered by Blue Cross and various life insurers are considered PHSPs. You have not provided any information describing what is covered under the HAP-HMO plan. As such, we are not able to confirm whether or not the payment of such premiums would qualify as a medical expense under paragraph 118.2(2)(q) of the Act.

Co-insurance Payments

Paragraph 118.2(2)(a) of the Act allows an individual to include, as a qualifying medical expense, an amount paid to a medical practitioner, dentist or nurse or a public or licensed private hospital for medical or dental services provided to the patient. Therefore, item number 2 above should qualify as a medical expense under paragraph 118.2(2)(a) of the Act.

Medication

In general, the cost of medication would qualify as a medical expense under paragraph 118.2(2)(n) of the Act if the use of the medication by the patient is prescribed by a medical practitioner and if the medication is dispensed by a licensed pharmacist who records the prescription and issues a receipt.

Travel Expenses

An amount paid to a person engaged in the business of providing transportation services to transport an individual not less than 40 kilometres from the locality where the individual resides to a place where medical services are received may qualify as a medical expense under paragraph 118.2(2)(g) of the Act. Similarly, other travel expenses may qualify as medical expenses under paragraph 118.2(2)(h) of the Act if the individual travels not less than 80 kilometres from the locality where the individual dwells to a place where medical services are received. Transportation and travel expenses for an accompanying individual may also qualify under paragraphs 118.2(2)(g) and (h) of the Act if the patient has been certified by a medical practitioner as being incapable of travelling alone.

An individual is entitled to claim transportation and travel expenses under paragraphs 118.2(2)(g) and (h) of the Act only if the following requirements are met:

(i) substantially equivalent medical services were not available in the individual's locality,

(ii) a reasonably direct travelling route was taken by the individual, and

(iii) the individual travelled to the particular place to obtain medical services for himself or herself and it is reasonable, having regard to the circumstances, for the individual to have travelled to that place for medical services.

Whether or not the above-noted requirements are met is a question of fact and assistance in making this determination may be obtained from your local tax services office.

You include the total of your medical expenses on line 330 of your return. You calculate your claim for medical expenses on line 332 of your return by subtracting either 3% of your net income (line 236) or $1,678 (2001 tax year rate); whichever is less, from line 330 (if the result is a negative you enter zero on line 332).

We have enclosed a copy of Interpretation Bulletin IT-519R2 (Consolidated), Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, for your information. Please note, as stated in paragraph 67 of IT-519R2 (Consolidated), proper receipts must support all expenses claimed as qualifying medical expenses.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, 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 disclaimer in all instances in which we provide an opinion.

We trust the above comments are of assistance.

Yours truly,

Daryl Boychuk, LL.B
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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