Principal Issues: Can expenses incurred to purchase a drug to treat a rare form of a skin condition qualify for the Medical Expense Tax Credit?
Position: Question of fact. Probably yes.
Reasons: The conditions provided in paragraph 118.2(2)(n) appear to be satisfied.
XXXXXXXXXX 2010-038658
December 2, 2010
Dear Sir,
Subject: Medical Expense Tax Credit
This is in response to your letter of October 20, 2010 requesting our opinion regarding the eligibility of a drug expenditure for the purposes of the medical expense tax credit ("METC") under section 118.2 of the Income Tax Act (the "Act").
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Specifically, you described the situation of a taxpayer who, to treat a rare skin condition and itchy scalp, was prescribed medication by a dermatologist. The purchase of the medication was recorded by a pharmacist.
Our Comments
It appears to us that the situation described in your letter and hereinafter summarized could constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of this Directorate to provide comments on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documentation to the appropriate Tax Services Office for its opinion. However, we can offer the following general comments that may be helpful.
Paragraph 118.2(2)(n) provides as follows:
118.2(2) - For the purposes of subsection (1), a medical expense of an individual is an amount paid
[...]
(n) for
- (i) drugs, medicaments or other preparations or substances (other than those described in paragraph (k))
(A) that are manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function,
(B) that can lawfully be acquired for use by the patient only if prescribed by a medical practitioner or dentist, and
(C) the purchase of which is recorded by a pharmacist… .
[...]
In the situation you described, we are of the view that the expenses incurred by the taxpayer to purchase a drug to treat a rare form of skin condition and itching of the scalp would fall within paragraph 118.2(2)(n) and consequently qualify for the METC.
We hope that these comments are of assistance.
Best regards,
François Bordeleau, Advocate
Manager
Business and Partnerships Section
Income Tax Rulings Directorate.