8 April 2003 External T.I. 2003-0007605 - MEDICAL EXPENSE TAX CREDIT

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: 1) Are the premiums paid in respect of a long-term care insurance policy qualified medical expenses for purposes of the medical expense tax credit? 2) Are the payments under the policy taxable to the recipient?

Position: 1) No 2) No

Reasons: 1) The policy does not specifically provide for the payment or reimbursement of qualifying medical expenses. 2) Benefits under the plan are not required to be included in income under the Act.

Bob Naufal, CMA
XXXXXXXXXX (613) 957-2744
2003-000760
April 8, 2003

Dear XXXXXXXXXX:

Re: Medical Expense Tax Credit

We are writing in response to your letter dated March 6, 2003 wherein you asked if the premiums paid for yourself and your wife (the "insured person") in respect of a Long Term Care insurance policy (the "Policy") are qualifying medical expenses for purposes of the medical expense tax credit and whether the benefits paid under the Policy are included in the computation of income.

Under the terms of the Policy the insured person receives a weekly benefit of $300 to a maximum lifetime benefit of $45,000 should he or she become physically dependent on help from another person and the physical dependency continues longer than a 30-day period. The Policy does not cover any specific medical or hospital expenses. The insured person is considered to be physically dependent when he or she always requires substantial human assistance to perform any two of the following activities of daily living:

(a) bathing,
(b) toileting,
(c) dressing,
(d) continence,
(e) feeding,
(f) moving to or from a bed or chair.

The insured person is also considered to be physically dependent if he or she requires continual supervision by another person to protect themselves from threats to health and safety due to deteriorated mental abilities, resulting from Alzheimer's disease or irreversible dementia.

Our Comments

Written confirmation of the tax consequences that apply to a particular fact situation is given by this directorate only in the context of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. However, we are prepared to provide the following general comments.

Section 118.2 of the Income Tax Act (the "Act") provides rules for determining the amount that may be claimed, as a tax credit, in respect of medical expenses. The credit applies to qualifying medical expenses, in excess of defined limits, incurred in any 12-month period ending in the taxation year.

Qualifying medical expenses generally include amounts paid for attendant care or care in a nursing home of an individual or his or her spouse, who has been certified in writing to have a severe and prolonged mental or physical impairment and would otherwise qualify for a disability tax credit. Qualifying medical expenses also include a payment that a person pays to a private health services plan for himself / herself or his / her spouse. A private health services plan is defined to include a contract of insurance under which coverage is provided in respect of hospital expenses, medical expenses or a combination of both.

Since the Policy does not specifically provide for the payment or the reimbursement of hospital or medical expenses, it is our view that the Policy would not qualify as a private health services plan. Consequently, the premiums paid under the Policy would not be qualifying medical expenses for purposes of the medical expense tax credit. However, any payments received under the Policy would not be taxable to the insured person.

We trust our comments will be of some assistance.

Yours truly,

Daryl Boychuk, LL.B
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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