18 June 2010 External T.I. 2010-0365801E5 - medical expenses - cosmetic procedures

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 cost of cosmetic procedures qualifies as a medical expense for purposes of the medical expense tax credit and should be covered as a medical expense under a private health services plan.

Position: Generally no. The 2010 Budget proposed that the cost of cosmetic procedures would generally not qualify as medical expenses unless the services are for medical or reconstructive purposes.

Reasons: The 2010 Budget proposals.

XXXXXXXXXX
									2010-036580
June 18, 2010

Dear XXXXXXXXXX :

I am writing in response to your correspondence of May 3, 2010, enquiring about expenses that may be covered by a private health services plan ("PHSP").

You have asked whether the cost of cosmetic procedures qualifies as a medical expense for purposes of a private health services plan ("PHSP").

Benefits received or enjoyed by an employee in respect of, in the course of, or by virtue of an office or employment are generally taxable as income from that office or employment pursuant to paragraph 6(1)(a) of the Income Tax Act (the "Act"). However, subparagraph 6(1)(a)(i) of the Act specifically excludes benefits derived from the contributions of a taxpayer's employer to or under a PHSP.

Pursuant to subsection 248(1) of the Act, a PHSP means a contract of insurance in respect of hospital expenses, medical expenses or any combination of such expenses, or a medical care insurance plan or hospital care insurance plan or any combination of such plans. In Interpretation Bulletin IT-339R2, Meaning of Private Health Services Plan, the Canada Revenue Agency has set out the requirements that must be met in order for a plan to be considered a PHSP. In paragraph 4 of that bulletin, it is stated that coverage under a PHSP must be in respect of hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense under the provisions of subsection 118.2(2) in the determination of the medical expense tax credit ("METC"). If a particular plan does not qualify as a PHSP, the amount of any benefit received out of the plan will be taxable to the employee.

The 2010 Budget proposes to exclude from medical expenses in subsection 118.2(2) of the Income Tax Act, cosmetic procedures that are paid for medical or dental services, or any related expenses, provided for purely cosmetic purposes, unless the services are required for medical or reconstructive purposes. Such expenses will not be eligible for the METC and will not qualify as medical expenses for purposes of coverage under a PHSP. The CRA has posted to its website some examples of procedures that will generally be ineligible as medical expenses for purposes of the METC and coverage under a PHSP. This information can be found on the CRA website at:
http://www.cra-arc.gc.ca/gncy/bdgt/2010/mdcl-eng.html

Examples of expenses that will generally be ineligible for the METC and coverage under a PHSP include:

• augmentations (such as chin, cheek, lips);
• body modifications (such as tongue splits);
• body shaping, contouring or lifts (such as, body, breasts, buttocks, face, and stomach);
• botulinum injections;
• chemical peels;
• implants (such as jewellery implanted into an eye or a tooth, or microdermal, transdermal, and subdermal cosmetic implants);
• filler injections (for removal of wrinkles);
• hair removal procedures;
• hair replacement procedures;
• laser treatments (skin resurfacing and removal of age spots);
• liposuction;
• reshaping procedures (such as rhinoplasty and otoplasty);
• rib removal;
• tattoo removal;
• teeth whitening; and
• tooth contouring and reshaping.

These expenses will continue to qualify for the METC and for coverage under a PHSP:

• breast implant and related procedures for reconstructive purposes after a mastectomy;
• breast reduction to reduce back and shoulder pain;
• dental braces, if required to correct a misaligned bite;
• dental veneers to correct decayed or misaligned teeth;
• gastric bypass surgery or gastric stapling;
• laser eye surgery; and
• removal of excess skin after rapid weight loss due to a risk of infection.

I trust that the information provided is helpful.

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