Jan 19, 2022
As we advised in Tax Tip 20-04 , significant additional disclosure and filing requirements for trusts were announced in the 2018 Federal Budget and are scheduled to apply for trust’s 2021 and subsequent tax years.
“certain alterations to a home or incremental construction costs may be eligible for METC treatment.”
The types of expenses that may be eligible for the Medical Expense Tax Credit (METC) 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 METC treatment. The patient does not have to own the home but must reside in it. This means that modifications to rental properties, or to a home owned by a family member, will qualify.
For people with severe and prolonged mobility impairments, driveway alterations (including resurfacing to enable the patient to access a bus (the CRA 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 developmental 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 is based on them being reasonable, required for the disability and not adding to the value of the dwelling.
Where a 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 tip does not contain a complete list of expenses eligible for the METC. Feel free to contact your TSG representative if you would like to discuss this topic in a particular situation.
TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.
The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.
TAX TIP is provided as a free service to clients and friends of Cadesky Tax.
The material provided in Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Cadesky Tax cannot accept any liability for the tax consequences that may result from acting based on the contents hereof.