Introduction
“Certain alterations to a home or incremental construction costs may be eligible for Medical Expense Tax Credit treatment”
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The types of expenses that may be eligible for the Medical Expense Tax Credit might surprise you. The credit is generally worth the same as a deduction from the lowest tax bracket, or about 21%, varying by province, and is normally available only to the extent qualifying medical expenses in a 12-month period exceed about $2,100 (indexed each year and varying slightly by province for the provincial credit).
If a family member lacks normal physical development, or has a severe and prolonged mobility impairment, certain alterations to a home or incremental construction costs may be eligible for Medical Expense Tax Credit treatment. The patient does not have to own the home but must reside in it. This means that modification to rental properties, or to a home owned by a family member, will qualify.
For people with severe and prolonged mobility impairments, driveways alterations (including resurfacing to enable the patient to access a bus (the Canada Revenue Agency also allows a van) may also be eligible. To be eligible, these costs must be reasonable. The determination of whether an expense is reasonable is a question of fact.
For renovations or alterations, an expense is allowed only if it is not expected to increase the value of the patient’s home and only if it would not be incurred, but for the mobility or the physical development impairment. There are cases where the installation of an accessible bathroom were disallowed because the value of the home increased. Items such as hot tubs, swimming pools, and hardwood floors do not qualify because of this rule. The courts have also held that while the cost of an elevator can be eligible, the cost of the elevator shaft is not.
Common examples of eligible expenses include indoor or outdoor ramps, the cost of enlarging hallways or doorways, lowering of kitchen and bathroom cabinets and other items within the home, installation of elevators or stair lifts and power flush toilets, and architect and contractors’ fees. Again, the eligibility of these items based on them being reasonable, required for the disability and not adding to the value of the dwelling.
Where the patient requires the use of a wheelchair, a portion of the cost of a van that, at the time of its acquisition or within six months after its acquisition, has been adapted to allow access for the wheelchair may also be eligible as a medical expense. This amount is limited to the lesser of $5,000 and, generally, 20% of the cost of the van.
Under a separate rule, landlords can deduct the cost of certain alterations to a building to enable individuals with a mobility impairment to have access to their building.
This article does not contain a complete list of expenses eligible for the Medical Expense Tax Credit. Feel free to contact your Chartered Accountant if you would like to discuss this topic in a particular situation.
Conclusion
The nature of the various types of medical expenses that qualify under the Income Tax Act are extensive and are being constantly updated by various court cases and by Canada Revenue Agency.
If you would like to engage Joe Truscott with respect to the above or any other income tax matters, please contact Joseph A. Truscott, Chartered Accountant at 905-528-0234 ext: 224, or email Joe at [email protected].
December 2012
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