13 December 2011 External T.I. 2011-0420021E5 - METC- Cost of Van and Cost of Adapting Van

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 acquisition cost of a van and the cost of adapting the van qualify for the METC.

Position: Yes, within certain limits, if all the conditions are met.

Reasons: Wording of the provisions.

XXXXXXXXXX 				2011-042002
					Chrys Tzortzis, CA
December 13, 2011

Dear XXXXXXXXXX :

Re: Cost of Van and Cost of Adapting the Van as Eligible Medical Expenses

We are writing in reply to your letter dated August 30, 2011, wherein you inquire whether the acquisition cost of a van and the cost of adapting the van for your quadriplegic son qualify as eligible medical expenses for the purposes of the medical expense tax credit ("METC"). You state that you purchased a new van for your disabled son and also paid for modifications, such as a lift and hand controls, to adapt the van for him. In addition, you state that your son is eligible for the disability tax credit and that it is usually transferred to you.

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.

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" includes the individual's child who is 18 years of age or older and who is dependent on the individual for support at any time in the year. Currently, 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 ($2,052 federally in 2011), to a maximum of $10,000. However, the 2011 federal budget proposes to remove this $10,000 limit for the 2011 and subsequent taxation years.

Medical expenses which are eligible for the METC are limited to those described in subsection 118.2(2) of the Income Tax Act ("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.

Amounts paid for the purchase and modification of a van may qualify as eligible medical expenses, within defined limits, provided certain conditions are satisfied. Under paragraph 118.2(2)(l.7) of the Act, a portion of the amount paid for the acquisition of a van, that has been adapted (at the time of its acquisition or within 6 months after that time) for the transportation of the patient who requires the use of a wheelchair, qualifies as an eligible medical expense. The amount that could qualify as an eligible medical expense is the lesser of $5,000 and 20% of the amount paid for the acquisition of the van after deducting any amount included therein which is claimed as an eligible medical expense under paragraph 118.2(2)(m) of the Act.

Under paragraph 118.2(2)(m) of the Act, an amount paid for a device or equipment may qualify as an eligible medical expense if certain conditions are met. Generally, to qualify, the device or equipment must be prescribed by a medical practitioner, must be included in the list of qualifying devices or equipment described in section 5700 of the Income Tax Regulations (the "Regulations") and must meet such conditions as are prescribed by the Regulations as to its use or the reason for its acquisition.

Under paragraph 5700(m) of the Regulations, power-operated lift or transportation equipment designed exclusively for use by, or for, a disabled individual to assist the individual to gain access to a vehicle or to place the individual's wheelchair in or on a vehicle is qualifying equipment for the purposes of paragraph 118.2(2)(m) of the Act. Under paragraph 5700(n) of the Regulations, a device designed exclusively to enable an individual with a mobility impairment to operate a vehicle is a qualifying device for the purposes of paragraph 118.2(2)(m) of the Act.

Based on the information provided in your correspondence, the portion of the acquisition cost of the van that would qualify as an eligible medical expense under paragraph 118.2(2)(l.7) of the Act appears to be the maximum amount of $5,000 provided the van was adapted within 6 months of its acquisition. In addition, the amounts paid for the power-operated lift and hand control modifications to the van (and any other modifications that are of the kind described above) would qualify as an eligible medical expense under paragraph 118.2(2)(m) of the Act if prescribed by a medical practitioner. Further information on medical expenses may be found in the CRA publication RC4064, Medical and Disability-Related Information, which is posted on the CRA Web site.

We trust that these 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