Principal Issues: Whether the cost of electricity used to operate an air conditioner qualifies as a medical expense for purposes of the medical expense tax credit
Position: No
Reasons: See 9722745 and 2005-0164501I7. We have allowed the cost of electricity used to operate a dialysis machine as a medical expense. The rationale for allowing the cost of electricity and water to operate a dialysis machine is that paragraph 118.2(2)(i) permits expenses "for or in respect of "..." which permits a much broader interpretation. The interpretation that the cost of electricity used to operate a dialysis machine qualifies as a medical expense is based on the fact that "in respect of " includes more than just the purchase cost of the dialysis machine. However, the wording in Regulation 5700(c.3) (which prescribes medical equipment and devices for purposes of paragraph 118.2(2)(m)) regarding air conditioners does not use such broad language and therefore, does not permit electricity used to operate an air conditioner to qualify as a medical expense.
December 18, 2007
Benefit Programs Directorate HEADQUARTERS Assessment and Benefit Services Branch Income Tax Rulings Directorate Attention: Michel Cronier (613) 957-2141 2007-025129
Medical Expense Tax Credit - Operating Costs Relating to Medical Equipment
This is in response to your memorandum of July 9, 2007, regarding whether operating costs relating to an air conditioner qualifies as a medical expense for purposes of the medical expense tax credit. In particular, you are asking why operating costs (ex. electricity) for certain equipment, may qualify as a medical expense when operating costs for air conditioners does not qualify as a medical expense.
As you know, expenses which are eligible for the medical expense tax credit are limited to those described in subsection 118.2(2) of the Income Tax Act (the "Act"). If a particular expenditure is not described as an eligible medical expense in subsection 118.2(2) of the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure does not qualify for purposes of the medical expense tax credit, even though the expenditure was incurred for medical reasons. The rationale for allowing the cost of electricity to operate a dialysis machine is that paragraph 118.2(2)(i) of the Act permits expenses "for or in respect of ...". It is our view that that the expression "in respect of" is broad and includes more than just the purchase cost of a dialysis machine and therefore, the cost of electricity related to the operation of a dialysis machine would also qualify as a medical expense. For purposes of paragraph 118.2(2)(m) of the Act, Income Tax Regulation 5700(c.3) (the "Regulations") prescribes a medical device or equipment that is an "air conditioner acquired for use by an individual to cope with the individual's severe chronic ailment, disease or disorder, to the extent of the lesser of $1,000 and 50% of the amount paid for the air conditioner". As the wording in Regulation 5700 (c.3) relating to air conditioners uses more restrictive wording, it is our view that the cost of electricity for an air conditioner would not qualify as a medical expense for purposes of the medical expense tax credit.
It is a longstanding position that the cost of maintaining and repairing a device or equipment listed in subsection 118.2(2) of the Act or section 5700 of the Regulations is a qualifying medical expense for purposes of the medical expense tax credit. In general, if the cost of a device itself qualifies for the medical expense tax credit then the cost of maintaining and repairing the device should also qualify.
We trust that these comments will be of assistance.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
G. Moore
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch