1 December 2009 Ministerial Correspondence 2009-0342291M4 - medical expenses - hot tub

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 the cost of a hot tub would qualify for the medical expense tax credit? 2. Whether the cost of a hot tub would qualify for the Home Renovation Tax Credit?

Position: 1. No. 2. Maybe.

Reasons: 1. There is no provision in the Act which would allow the cost of a hot tub to be claimed as a medical expense for purposes of the medical expense tax credit. 2. If the hot tub is permanent (hardwired to the house), it may qualify for the home renovation tax credit if certain conditions are met.

December 1, 2009

XXXXXXXXXX

Dear XXXXXXXXXX :

XXXXXXXXXX , forwarded to me a copy of your correspondence, which I received on September 22, 2009, regarding your husband's claim for the medical expense tax credit.

You want to know why the amount paid for the purchase of a therapeutic hot tub would not qualify as a medical expense for the purpose of the medical expense tax credit, but would qualify for the home renovation tax credit (HRTC).

Subsection 118.2(2) of the Income Tax Act provides a list of expenditures that qualify as medical expenses. Under paragraph 118.2(2)(m) of the Act, a payment made for prescribed medical devices and equipment may qualify as a medical expense if certain conditions are met. Generally, to qualify, the device or equipment must be prescribed by a medical practitioner and must be included in the list of qualifying medical devices or equipment described in section 5700 of the Income Tax Regulations. A hot tub is not included in the list of qualifying medical devices described in the Regulations. Accordingly, an amount paid for a hot tub would not qualify as a medical expense. As well, the federal budget of February 23, 2005, indicated that it was contrary to the tax policy intent that hot tubs be an allowable expense for the purpose of the medical expense tax credit.

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.

The costs associated with the purchase and installation of a permanent hot tub (spa) are indeed eligible expenditures for the HRTC. A permanent hot tub is the larger, heavier type of hot tub that is permanently positioned in place and hard wired into the homeowner's electrical panel. These hot tubs are generally not portable, therefore they are considered to be eligible for the HRTC.

You can find more information on the HRTC on the Canada Revenue Agency (CRA) Web site at www.cra.gc.ca/hrtc and in the Government of Canada brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf.

The role of the CRA is only to administer and enforce the Income Tax Act as passed by Parliament. To recognize the cost of a therapeutic hot tub as a medical expense, a legislative amendment to the medical expense provisions of the Act would be required. The primary responsibility for tax policy and legislation rests with the Department of Finance Canada. I am therefore forwarding a copy of our correspondence to the Honourable James M. Flaherty‚ Minister of Finance, for his consideration.

I trust that the information I have provided is helpful.

Sincerely,

Jean-Pierre Blackburn, P.C., M.P.
Minister of National Revenue

c.c.: The Honourable James M. Flaherty‚ P.C.‚ M.P.

Minister of Finance
House of Commons
Ottawa ON K1A 0A6

G. Moore (613) 957-2141
(2009-034229)