22 January 2009 External T.I. 2008-0304581E5 - Renovations as 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.

Principal Issues: Whether an addition to a taxpayer's home qualifies as medical expenses under paragraph 118.2(2)(l.2) or 118.2(2)(1.21)

Position: Paragraph 118.2(2)(l.2) is the relevant provision to consider where an extension is made to a taxpayer's home for medical purposes. Only a small portion of such expenses would qualify since subparagraphs 118.2(2)(l.2)(i) and (ii) likely deny most of the costs of an addition to the home.

Reasons: Amendment to paragraphs 118.2(2)(l.2) and 118.2(2)(l.21) for expenses incurred after February 22, 2005.

							2008-030458
XXXXXXXXXX						Rob Ferrari
(613) 957-2138
January 22, 2009

Dear XXXXXXXXXX :

Re: Renovations to build an extension on home as a medical expense

This is in response to your correspondence of December 3, 2008, with respect to the above noted matter.

In the circumstances you have described, your client became paralyzed in 2008 and will permanently require the full-time use of a wheelchair. Since much of your client's home is not accessible or practical for day to day use in a wheelchair, she plans to add an extension onto her home in order to make it more functional for her needs. You ask whether the expenses to build the addition to the home qualify for the medical expense tax credit (the "METC").

Our Comments

Paragraph 118.2(2)(l.2) of the Income Tax Act (the "Act"), "Home renovations or alterations for disabled person" provides for reasonable expenses relating to renovations or alterations (including extensions) to a dwelling of the patient who lacks normal physical development or has a severe and prolonged mobility impairment, to enable the patient to gain access to, or to be mobile or functional within, the dwelling.

Paragraph 118.2(2)(l.2) of the Act was amended in respect of expenses incurred for renovations and alternations incurred after February 22, 2005. Subparagraphs 118.2(2)(l.2)(i) and 118.2(2)(l.2)(ii) were added to clarify that such costs remain eligible for the METC provided the expenses:

(i) are not of a type that would typically be expected to increase the value of the dwelling, and

(ii) are not of a type that would not normally be incurred by persons who have normal physical development or who do not have a severe and prolonged mobility impairment.

It would appear the majority of the expenses to add the extension to your client's home would not qualify for the METC under subsection 118.2(2) of the Act since they would typically be expected to increase the value of the home. In addition, such expenses would be of a type that would normally be incurred by persons who have normal physical development or who do not have a severe and prolonged mobility impairment.

As indicated in the 2005 Budget Supplementary Information, the new conditions were added to clarify the type of renovations and alternations contemplated under paragraph 118.2(2)(l.2) of the Act to include such items as the cost of installing entrance and exit ramps, widening doorways, lowering shelves, modifying kitchen cabinets and moving electrical outlets.

We trust the above will be of assistance.

Yours truly,

Gwen Moore
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch