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The Medical Expense Tax Credit under the Income Tax Act (Canada)
A decision of the Tax Court of Canada that was released on November 21, 2005 has held that the services offered by schools to students enrolled in the Arrowsmith Program will qualify as a medical expense for the purposes of the Medical Expense Tax Credit under the Income Tax Act of Canada.
Justice Paris concluded as follows:
"The purpose of the medical expense tax credit provisions, of which subsection 118.2(2) is a part, is to provide tax relief to a person suffering from a medical condition for additional costs associated with treatment of that condition. A travel expense that is incurred in order to obtain treatment which is not available to the taxpayer locally is one such additional cost.
To hold that the services received by the Appellant's daughter in the Arrowsmith Program were not medical services would, in my view defeat the intention of Parliament, especially in light of the fact that Parliament has recognized the cost of the services themselves as a medical expense. I think it would be unduly restrictive to interpret the term medical services in such a manner as to require that these services be performed by a medical practitioner. As the Federal Court of Appeal stated in Johnston v. The Queen,[3] a provision of the Act "... must not be interpreted so restrictively as to negate or compromise the legislative intent".
In conclusion, I find that the services provided in the Arrowsmith Program are medical services. The activity undertaken by the participants in the program is a form of neurological therapy designed to treat a medical condition. Such therapy was provided specifically for the purpose of strengthening weaker defective cognitive capacities at the root of the participants' learning disabilities. According to the uncontradicted evidence led on behalf of the Appellant, the techniques used in the program have a basis in neuroscience, and involve the diagnosis and treatment of the Appellant's daughter's disability. As such they are related to the science of medicine and are medical services."
This decision involved a student who was enrolled in the Arrowsmith Program at Colin Macdonald Community School in Hamilton, Ontario. The family claimed the cost of driving her every day from their home in the town of Simcoe to Hamilton and back, a distance of approximately 80 kilometers each way.
The Canada Revenue Agency allowed the tuition fees as a medical expense under paragraph 118.2(2)(e) of the Income Tax Act, but denied the portion of the claim that related to the travel expense. The family appealed the disallowance of the claim for the travel expense, which may qualify as a medical expense where, as here, the school is located more than 40 kilometres from the family’s home.
The decision has established that the tuition and other eligible expenses incurred by a family whose child is enrolled in the Arrowsmith Program will qualify for the Medical Expense Tax Credit if the other conditions of the Act are met.
This credit will, as an example, result in a tax saving of approximately $3,000 for a family with a combined annual family income of $100,000 based on a claim for a tuition amount of $17,000. The actual tax saving for a particular family will depend on the family’s individual financial circumstances.
Parents will need to establish by way of a letter from a qualified medical practitioner that their child has been diagnosed with a learning disability and requires the Arrowsmith Program.
The Medical Expense Tax Credit should be distinguished from the Disability Tax Credit which may be claimed where there is evidence of more severe impairments.
Please refer to the website of the Technical Advisory Committee on Tax Measures for Persons that was appointed in April 2003 by the Minister of Finance and the Minister of National Revenue to address issues related to tax measures benefiting persons with disabilities and its Report released in December, 2004.
The Medical Expense Tax Credit should also be distinguished from child care expenses, which may be claimed in certain situations for the cost of an after school care program.
Persons interested in further information may refer to:
The full text of the court's decision in Patton v The Queen
Website of the Technical Advisory Committee on Tax Measures for Persons with Disabilities.
Report of the Technical Advisory Committee on Tax Measures for Persons with Disabilities
We are not offering tax advice and recommend in every case that individuals contact their own lawyer, accountant or financial advisor for professional tax and accounting advice.