What impact does the timing of payment of medical expenses have on the computation of the medical expense tax credit ("METC") in s. 118.2(1), e.g., where fees are paid on January 1, 2015 for a dental treatment plan under which the services would be rendered in 2015 and 2016?
CRA responded that “an individual's medical expenses include expenses paid to a dentist which are for dental services provided to the individual in the taxation year in which the expenses were incurred,” so that fees which were prepaid in 2015 for services charges that would not be incurred in 2016, such fee could not qualify as medical expenses until 2016. After stating that it could be considered that “an expense is ‘incurred’…only where there is an obligation to pay a sum of money,” CRA went on to state:
[I]f it is established that that the services are provided and the expenses are incurred in 2016, the expenses paid to a dentist for dental services would be medical expenses under paragraph 118.2(2)(a) as long as the expenses were paid at some time. The time of payment may be before or after 2016.
CRA went on to confirm that for purposes of computing the medical expense tax credit ("MEC") in s. 118.2(1) for a year, an individual may choose any 12-month period ending in the year, but that the medical expenses must have been paid during the period so chosen. For example, if dental fees were paid on December 31, 2015, they would not be eligible for the METC computation for the 2016 taxation year if the individual had selected the calendar year, but such fees could be included in the computation of the METC in the 2016 return if the selected period included December 31, 2015.