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 the purchase price, including installation cost, of a generator qualify as an eligible medical expense for the purposes of the medical expense tax credit (METC).
Position: 1) No, the cost of a generator, including installation, would not qualify as an eligible medical expense, but a reasonable portion of the operating costs to run the generator to operate an artificial kidney machine for the patient would qualify as an eligible medical expense under paragraph 118.2(2)(i). 2) No operating costs are eligible where the generator is used to operate an automated cycler machine.
Reasons: 1) A generator is not necessary for the installation of an artificial kidney machine, and it is unlikely that the hospital who authorized the installation of the artificial kidney machine required the generator in order to install the artificial kidney machine. 2) An automated cycler is not listed as an eligible device under paragraph 118.2(2)(i).
XXXXXXXXXX 2023-097408
C. Underhill
October 19, 2023
Dear XXXXXXXXXX:
Re: Amounts paid for a generator
We are writing in response to your correspondence, which we received on May 10, 2023, about whether the amounts paid for a generator would qualify as an eligible medical expense for the purposes of the medical expense tax credit (METC).
You advised us that you are diagnosed with kidney failure and require peritoneal dialysis treatments three times a day at home. You explained that treatments are possible but not comfortable without hydro since electricity allows you to warm up the solution. You attached a letter from your nephrologist noting that a generator is required in order for you to continue the treatments at home without disruption. You plan on purchasing and installing a generator that will be permanently affixed to your existing dwelling in order to warm up the solution used in your peritoneal dialysis treatments in the event of a power outage.
Our comments:
This technical interpretation provides general comments about the provisions of the Income Tax Act (the Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
The Canada Revenue Agency’s (CRA) general views regarding the METC are contained in Income Tax Folio S1-F1-C1, Medical Expense Tax Credit (the “Folio”). You can find a Folio online by going to Canada.ca and typing the name of the Folio into the search toolbar.
Medical expenses which are eligible for the METC are limited to those described in subsection 118.2(2) of the Act. If a particular expenditure is not described as an eligible medical expense in subsection 118.2(2) of the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure will not qualify for purposes of the METC, even though the expenditure may have been incurred for medical reasons.
Paragraph 1.73 of the Folio clarifies that under paragraph 118.2(2)(i) of the Act, eligible medical expenses include the purchase price or, where applicable, the rental charge or other expense related to the devices listed in paragraph 118.2(2)(i) of the Act. One of the devices listed is “an artificial kidney machine”.
It is our understanding that “an artificial kidney machine” is used for patients requiring hemodialysis. In peritoneal dialysis, a patient may use a machine called an automated cycler. An automated cycler does not appear to be an “artificial kidney machine” and is not specifically listed in paragraph 118.2(2)(i). Therefore, the costs related to the operation of an automated cycler, such as the use of a generator, would not qualify as an eligible medical expense under paragraph 118.2(2)(i).
As noted above, the Act allows an amount paid for, or in respect of, an “artificial kidney machine” for the patient. The words “in respect of” have been interpreted to encompass words of the widest possible scope. Therefore, we have previously taken the position that allowable expenses could include electricity or batteries to operate the device, repairs, maintenance and supplies, among others. See paragraph 1.74 of the Folio for more information.
Paragraphs 1.82 to 1.86 of the Folio discuss further the costs allowed relating to an “artificial kidney machine”. The cost of electricity to operate an artificial kidney machine and the costs of alterations to a home or the upgrading of the home’s existing electrical system are allowed provided that these costs are reasonable in the circumstances and are necessary for the installation of the machine. However, where there is a combination of both a personal and medical purpose for making the particular expenditure, a proration would have to be made to determine the reasonable portion, if any, which relates to the particular medical purpose of the expenditure.
Where a generator is permanently affixed to the dwelling and designed to operate in conjunction with the home’s electrical panel, it appears that its installation would most likely be viewed as an alteration to the home for the purposes of the Act. However, it is our view that a generator is not necessary for the installation of an “artificial kidney machine” and it is unlikely that the hospital who authorized the installation of the “artificial kidney machine” required the generator in order to install the machine. Therefore, the cost of a generator, including installation, would not qualify as an eligible medical expense under paragraph 118.2(2)(i) of the Act, even if it was bought and used for an artificial kidney machine. However, given our broad interpretation of paragraph 118.2(2)(i) of the Act, it is our view that a reasonable portion of the operating costs of a generator to operate an “artificial kidney machine” would qualify as an eligible medical expense. Unfortunately, the Act does not permit this viewpoint to apply to the costs of operating an automated cycler since this type of machine is not listed as an eligible device for purposes of the METC.
The Canada Revenue Agency is responsible for administering the provisions of the ITA and not tax policy. Tax policy is the responsibility of the Department of Finance, Canada. If you wish to pursue this issue further, we suggest that you contact the Tax Policy Branch of the Department of Finance, Canada.
We trust that these comments will be of assistance to you.
Yours truly,
Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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