20 February 2012 External T.I. 2012-0436431E5 - medical expenses - residential treatment center

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 amounts paid to a residential treatment center in the United States would be considered to be a medical expense?

Position: General comments given outlining the requirements of the Income Tax Act.

Reasons: The law

XXXXXXXXXX

February 20, 2012								2012-043643

Dear XXXXXXXXXX :

Re: Medical Expense Tax Credit

This is in response to your letter of December 6, 2011, inquiring about medical expenses.

In particular, you indicate that you have an eating disorder and depression. You are enquiring about whether the cost of attending a residential treatment center in the United States would qualify as an eligible medical expense for purposes of the medical expense tax credit ("METC"). You indicate that the great majority of the cost for this medical treatment relates to medical services provided by psychiatrists and nurses for psychological treatment and therapy. You are also asking if your father pays for the treatment whether he would be able to claim the cost of the treatment as a medical expense on his tax return. You have indicated that you are living on your own and are not sure whether you would be considered to be his dependant.

Written confirmation of the tax consequences that apply to a particular fact situation is given by this Directorate only in the context of an advanced income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency publications can be accessed on the CRA Web site at www.cra-arc.gc.ca. However, we are prepared to provide the following general comments, which may be of assistance.

Our Comments

Medical Services:

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 does not qualify for purposes of the METC, even though the expenditure may have been incurred for medical reasons.

School, Institution or Other Place:

There are two requirements that must be met in order for fees paid to a school, institution or other place to qualify as a medical expense under paragraph 118.2(2)(e) of the Act in respect of an individual who receives care and training at that place:

a) the individual must be suffering from a physical or mental handicap, the severity of which is such that the person requires the equipment, facilities or personnel specially provided by the school, institution or other place; and,
b) an appropriately qualified person must certify that the above conditions are met with respect to the individual receiving the care at that place.

This certification is usually carried out by a medical practitioner, but is not restricted to such professionals. Generally, a written certificate provided by an appropriately qualified person at the institution should include a description of the equipment, facilities or trained professionals required to adequately provide care, or care and training, for the individual. In addition, the Canada Revenue Agency must be satisfied that the equipment, facilities or personnel provided by a particular place meet this description.

Paragraph 29 of the current version of Interpretation Bulletin IT-519, Medical Expense and Disability Tax Credits and Attendant Care Expenses Deduction, indicates that, for purposes of paragraph 118.2(2)(e), "other place" may include an out-patient clinic. An "appropriately qualified person" includes a medical practitioner as well as any other person who has been given the required certification powers under the law in that jurisdiction. A patient suffering from a behavioral problem arising out of a mental or physical handicap who attends a school, institution or other place that specializes in the care and training of persons who have the same type of handicap is considered to qualify under paragraph 118.2(2)(e), and the expenses paid for the patient are qualifying medical expenses. For example, amounts paid for a patient suffering from an addiction to drugs or alcohol or who has an eating disorder may qualify under paragraph 118.2(2)(e). Consequently, when all the conditions of that paragraph, as discussed above, are met, the cost for the medical care of the patient in a clinic to treat an eating disorder or a drug or alcohol addiction qualify as medical expenses.

As indicated in paragraph 30 of IT-519, there is no requirement that a detoxification clinic be a public or licensed private hospital. While the care need not be full time, it must be stressed that the equipment, facilities or personnel specially provided by the "other place" must be specifically tailored for the care of persons suffering from the physical or mental handicap in question and that the other conditions set out above must be met, for the fees to qualify as medical expenses under paragraph 118.2(2)(e) of the Act. In our view, based on the information provided, it appears that the clinic you are planning on attending for the medical treatment of your eating disorder and depression would qualify as long as all the requirements of paragraph 118.2(2)(e) are met.

Dependant:

In general, an individual may claim the METC in respect of eligible medical expenses incurred in respect of the individual, the individual's spouse, the individual's common-law partner, a child of the individual who is under 18 years of age, or a dependant of the individual (referred to below as the "patient"). For the purposes of the METC, a "dependant" of an individual for a taxation year means a person who at any time in the year is dependent on the individual for support and is (a) the child (who is 18 years of age or older) or grandchild of the individual or of the individual's spouse or common-law partner or (b) the parent, grandparent, brother, sister, uncle, aunt, niece or nephew, if resident in Canada at any time in the year, of the individual or of the individual's spouse or common-law partner. The individual may only claim the eligible medical expenses in respect of the dependant that exceed the lesser of 3 per cent of the dependant's income for the year and an indexed dollar threshold.

A "dependant" is defined in subsection 118(6) of the Act and includes a child who "at any time in the year is dependent on the individual for support..." It is a question of fact in each case to determine whether or not the actions or contributions of a particular individual are of such a nature and degree that they could be said to constitute "support" of another person. Although consideration should be given to the availability and quantum of support provided, a person is generally considered to be dependent on an individual if the individual has actually supplied necessary maintenance, or the basic necessities of life (food, shelter and clothing) to the person on a regular and consistent basis. It is a question of fact whether an individual is a dependant for purposes of subsection 118(6) of the Act. We do not have sufficient information to determine if you are a dependant of your father for purposes of subsection 118(6).

Travel Expenses:

Under paragraph 118.2(2)(g) of the Act, an individual may claim as an eligible medical expense an amount paid to a person engaged in the business of providing transportation services, to the extent that the payment is made for the transportation of

(i) the patient, and
(ii) one individual who accompanied the patient, where the patient was, and has been
certified by a medical practitioner to be, incapable of travelling without the assistance of an attendant from the locality where the patient dwells to a place, not less than 40 kilometres from that locality, where medical services are normally provided, or from that place to that locality, if
(iii) substantially equivalent medical services are not available in that locality,
(iv) the route travelled by the patient is, having regard to the circumstances, a reasonably direct route, and
(v) the patient travels to that place to obtain medical services for himself or herself and it is reasonable, having regard to the circumstances, for the patient to travel to that place to obtain those services.

In addition, under paragraph 118.2(2)(h) of the Act, an individual may claim an amount paid for reasonable travel expenses (for example, accommodation and meals) incurred in respect of the patient and, where the patient was, and has been certified by a medical practitioner to be, incapable of travelling without the assistance of an attendant, in respect of one individual who accompanied the patient, to obtain medical services in a place that is not less than 80 kilometres from the locality where the patient dwells if the circumstances described in subparagraphs (g)(iii), (iv) and (v) above apply.

We trust that these comments will be of assistance.

Yours truly,

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