17 November 2009 External T.I. 2009-0342581E5 - Swimming pool for METC and HRTC

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: 1) Whether a swimming pool may qualify for the medical expense tax credit. 2) Whether a swimming pool qualifies for the home renovation tax credit.

Position: 1) No. 2) Yes

Reasons: 1)Pursuant to the restrictions under paragraph 118.2(2)(l.2), a swimming pool would typically be expected to increase the value of the home. Additionally, such an expense 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. A swimming pool would also not qualify under paragraph 5700(i) of the Regulations which describes a "device that is exclusively designed to assist an individual in walking where the individual has a mobility impairment ". 2) CRA website of examples of eligible expenses in the home renovation tax credit includes swimming pools.

XXXXXXXXXX 								2009-034258
									Rob Ferrari
November 20, 2009

Dear: XXXXXXXXXX :

Re: Swimming Pool - Medical Expense Tax Credit and Home Renovation Tax Credit

This is in response to your fax of September 28, 2009, inquiring whether an indoor swimming pool may qualify as a medical expense. You indicate that an individual's physician prescribed the swimming pool for the purpose of alleviating chronic pain. You also indicate that there is little to no other personal use of the swimming pool the individual's family.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular as well as Interpretation Bulletin IT-519R2 (Consolidated), "Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction", ("IT-519R2") can be accessed on the internet at http://www.cra-arc.gc.ca. However, we are prepared to provide the following comments.

Medical Expense Tax Credit ("METC")

In order for an expense to qualify as a medical expense for the purposes of the METC, the cost of a service or item must be described as an eligible medical expense under subsection 118.2(2) of the Income Tax Act (the "Act"). With regard to a particular medical device, it may qualify as a medical expense under paragraph 118.2(2)(m) of the Act if it is prescribed under section 5700 of the Income Tax Regulations (the "Regulations"), and is for the patient's use as prescribed by a medical practitioner. This paragraph also provides that the particular medical device must also meet such conditions as are prescribed to its use or as to the reason for its acquisition.

Paragraph 5700(i) of the Regulations describes a "device that is exclusively designed to assist an individual in walking where the individual has a mobility impairment." Since a swimming pool would not be considered to be a device exclusively designed to assist an individual in walking, it would not qualify for the METC under paragraph 118.2(2)(m).

Paragraph 118.2(2)(l.2) of the Act 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. To qualify for the METC for expenses incurred after February 22, 2005, subparagraphs 118.2(2)(l.2)(i) and 118.2(2)(l.2)(ii) require that the renovations or alterations:

(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 swimming pool would also not qualify for the METC under paragraph 118.2(2)(l.2) since it has not met either of the conditions under subparagraph 118.2(2)(l.2(1) and 118.2(2)(l.2)(ii). Swimming pools would typically be expected to increase the value of the home and are normally acquired by persons for general health, fitness and entertainment reasons.

It is also our view there is no other provision under subsection 118.2(2) of the Act which would permit the cost of a swimming pool to be claimed as an eligible medical expense for the purpose of the METC.

Home Renovation Tax Credit ("HRTC")

The proposed HRTC will provide individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010, for agreements entered into after January 27, 2009. Taxpayers can claim this credit for the 2009 tax year on eligible expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.

The legislation regarding the new HRTC was introduced in the House of Commons on September 30, 2009, by the Honourable James M. Flaherty, Minister of Finance. The proposed legislation states that expenditures will qualify if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures will include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.

An eligible dwelling is a housing unit located in Canada that is owned by the individual at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC. Expenditures incurred pursuant to an agreement entered into before January 28, 2009, are not eligible for the HRTC

Providing the above conditions are met, the cost of adding a permanent swimming pool to an eligible dwelling will qualify for the HRTC. However, costs for routine repairs and maintenance, normally performed on an annual or more frequent basis, will not qualify for the HRTC. You may wish to know that expenditures that qualify for the HRTC will not be reduced by other government tax credits or grants.

You can find more information on the HRTC on the Canada Revenue Agency Web site at www.cra.gc.ca/hrtc and on the Government of Canada's Action Plan Web site at www.actionplan.gc.ca/grfx/docs/HRTC_eng.pdf.

We trust that our comments will be of assistance.

Yours truly,

G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch