4 October 2004 External T.I. 2004-0077371E5 - Health care spending account-home care

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.

Principal Issues: Does an amount paid by an individual for home care, in the form of cleaning and cooking provided to the individual's parents in law, who occupy a self contained residence on the individual's property, qualify as a medical expense eligible for reimbursement under a health care spending account?

Position: An amount paid in respect of home care for an elderly parent qualifies as a medical expense where: 1) the elderly parent is dependent on the individual for support at some time in the year; 2) a medical practitioner has certified (in writing or completion of Form T2201) that the parent is and will likely continue for a prolonged period of indefinite duration to be dependent on others for personal needs and care and as a result requires a full-time attendant; 3) the attendant is neither the individual's spouse nor under 18 years of age; and 4) the payee provides receipts including social insurance number to the payer.

Reasons: The determination is a question of fact.

Bob Naufal, CMA
XXXXXXXXXX (613) 957-2744
2004-007737
October 4, 2004

Dear XXXXXXXXXX:

Re: Health care spending

We are writing in response to your letter dated May 17, 2004, wherein you asked if an amount paid for home care qualifies as a medical expense eligible for reimbursement under a health care spending account. In the letter, you describe that an employee pays for home care, in the form of cleaning and cooking, for his mother-in-law, who is disabled, and father-in-law, who occupy a self contained residence on the employee's property.

Our Comments

Written confirmation of the tax implications 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, dated May 17, 2002. However, we are prepared to provide you with the following general comments.

Health spending account

In order for a health spending account to qualify as a private health services plan, it must meet the criteria set out in Interpretation Bulletin, IT-339R2, Meaning of "private health services plan". In this regard, one of the criteria is that coverage under the health spending account must be in respect of qualifying medical expenses as defined in subsection 118.2(2) of the Income Tax Act (the "Act").

Qualifying medical expenses

Subsection 118.2(2) of the Act identifies the type of expenditures that qualify as medical expenses. The payment of such expenses must be in respect of a patient. A "patient" refers to the individual or to the individual's spouse or dependant, as the case may be, on whose behalf the qualifying medical expenses are paid. In this regard a "dependant" of an individual for a particular taxation year includes a parent of the individual or individual's spouse, resident in Canada at some time in the year, and dependent on the individual for support at some time of the year.

Whether or not an individual supports another person is a question of fact. Generally, a person will be dependent for support on an individual if the individual has actually supplied necessary maintenance, or the necessities of life, to the person on a regular and consistent basis. For example, an elderly parent, who is not wholly self-supporting because of a mental or physical infirmity, and living with a married child, who provides the necessary food, lodging, clothing, medical care, etc., would qualify as a dependant of that child.

Attendant care for a Patient with a Severe and Prolonged Impairment

Qualifying medical expenses include amounts paid, subject to defined limits, as remuneration for attendant care (other than attendant care provided by a person who, at the time the remuneration is paid, is the individual's spouse or is under 18 years of age) of a patient who has a severe and prolonged mental or physical impairment that has been certified in prescribed form (Form T2201, Disability Tax Credit Certificate) by a medical practitioner (typically a medical doctor). The amount paid for attendant care of a patient can include full-time attendant care or part-time attendant care. In the case of part-time attendant care, the claim is subject to a limit of $10,000 per year (or $20,000 in the year of death). The attendant care must be separate from any full-time care provided by and paid to a nursing home.

Attendant care

In our view, attendant care is care provided by an attendant who performs those personal tasks, which the person with a disability is unable to do for himself or herself. Depending on the situation, such tasks could include meal preparation, maid and cleaning services, transportation, and personal services, such as banking and shopping. Attendant care would also include providing companionship to a person with a disability. However, attendant care expenses would not normally include a payment to a person for the procurement of a particular service such as providing maid or cleaning services or a drycleaner.

Moreover, it is our view that full-time attendant care in respect of a patient generally requires the patient to receive constant care and attendance by reason of the patient's injury, illness or affliction. The expression is not intended to mean one attendant only looking after the patient on a continuous basis but rather several attendants could be utilized over a specific period of time so long as there is only one attendant for any given period of time.

Home care

Payments by an individual in respect of home care of an elderly parent may also qualify as a medical expense, even if the parent does not qualify for the disability tax credit, where all the following criteria are met:

(a) the elderly parent is dependent on the individual or his or her spouse for support at some time in the year;

(b) a medical practitioner (usually a medical doctor) certifies in either a letter or by completing Form T2201, Disability Tax Credit Certificate, that, because of a mental or physical infirmity, the elderly parent is, and will likely continue for a prolonged period of indefinite duration to be, dependent on others for personal needs and care and, as a result, requires a full-time attendant as described above;

(c) at the time the remuneration is paid, the attendant is neither the individual's spouse nor under 18 years of age;

(d) the amount paid is for the service of providing full-time attendant care and not for the procurement of a specific service such as meal preparation or cleaning services; and

(e) receipts for payments to the attendant must be issued by the payee and include, if the payee is an individual, his or her social insurance number.

For more information on this matter please refer to Interpretation Bulletin IT-519R2, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, which is available on our web site at www.ccra-adrc.gc.ca.

We trust our comments will be of some assistance.

Yours truly,

Wayne Antle, CGA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate