27 June 2005 External T.I. 2005-0135291E5 - Respite 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: Are amounts received by respite care providers taxable?

Position: Yes.

Reasons: Amounts received by respite care providers are taxable either as employment or business income. Paragraph 81(1)(h) generally does not apply because the cared-for individual does not reside with the caregiver nor is the caregiver's principal place of residence maintained as the residence of the cared-for individual.

XXXXXXXXXX
	2005-013529
									Charles Rafuse
	613-957-8967
June 27, 2005

Dear XXXXXXXXXX:

Re: Respite Care

This is in reply to your letter of January 7, 2005, regarding the taxation of amounts received by individuals who provide respite care.

Specifically, you have indicated that you are considering a part-time job as a support worker for Child and family Services. The duties would include providing assistance to a foster parent who has several aboriginal foster boys residing with him.

Our Comments

In general terms, amounts received for providing respite care are taxable under the Act either as employment income for individuals who provide the services as employees or business income for individuals who are self-employed. When calculating business income, taxpayers are generally entitled to deduct the expenses incurred to earn the income.

With respect to your concern that respite care payments should be treated the same for income tax purposes as foster care payments, we would like to note that paragraph 81(1)(h) of the Act exempts foster care payments from income. Specifically, paragraph 81(1)(h) exempts from income social assistance payments made to an individual caregiver (the "Caregiver") for the benefit of a foster person (the "Cared-for individual") under the Caregiver's care. The Cared-for individual can be either a child or an adult. The exemption applies to an amount received by the Caregiver when all of the following conditions apply:

1. The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test;

2. The payment is made under a program provided for by a federal, provincial or territorial law;

3. The payment is received directly or indirectly by the Caregiver for the benefit of the Cared-for individual;

4. The Cared-for individual is not the Caregiver's spouse or common-law partner or related to the Caregiver or the Caregiver's spouse or common-law partner;

5. No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law is payable in respect of the Cared-for individual for the period for which the social assistance payment is made; and

6. The Cared-for individual resides in the Caregiver's principal place of residence, or the Caregiver's principal place of residence is maintained for use as the Cared-for individual's residence, during the period for which the payment is made.

Since the aboriginal foster boys would be residing with a foster parent and not with you, it is our view that paragraph 81(1)(h) does not apply to exempt income that you would receive from a part-time job as a support worker for Child and family Services.

We trust this information is helpful.

Yours truly,

Charles Rafuse
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch