Why CRA denied a taxpayer’s medical expense claims associated to transferring

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With mere days to go earlier than the Canada Income Company‘s Might 1 basic private tax submitting deadline, this weekend is your last probability to assemble all these slips and backup documentation you’ll must file your return on time. Among the many receipts you’ll wish to monitor down are these for medical bills, which, if massive sufficient, might can help you declare the medical expense tax credit score (METC).

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The non-refundable METC will be claimed for medical bills that weren’t coated by your provincial, group or non-public medical health insurance plan. On your 2022 return, the METC is offered offered your loved ones’s whole medical bills exceed a minimal threshold equal to the lesser of three per cent of your internet earnings or $2,479 (for 2022). You can even declare a provincial/territorial credit score, with the minimal earnings thresholds various by jurisdiction. Qualifying bills embrace these you paid for your self, your partner or accomplice, and your children underneath age 18.

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A current tax case exhibits the challenges one Vancouver-area taxpayer confronted when attempting to say numerous medical bills on his 2018 tax return. The taxpayer and his spouse claimed the METC for bills associated to his mobility incapacity arising from situations that existed, and have deteriorated, since he contracted polio as a toddler. This incapacity necessitated a transfer from the couple’s two-storey, century-old dwelling to a single-storey, grade-level dwelling that might accommodate the taxpayer’s rising mobility limitations.

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The CRA permitted the taxpayer to say medical bills of $31,598, together with renovations of $26,282 to their new dwelling, and $2,000 for transferring bills associated to transferring provides and the price of a mover. The CRA, nonetheless, disallowed his declare for a property switch tax (PTT) fee of $17,600 on the acquisition of the brand new dwelling, on the premise that the $2,000 restrict, specified within the Earnings Tax Act for claiming transferring bills as a medical expense, had already been reached.

Within the taxpayer’s case, monetary constraints prevented him from renovating his 100-year-old dwelling or from constructing a brand new dwelling. Essentially the most viable choice for him was to purchase one other dwelling and transfer. Consequently, he argued that the PTT fee was not a transferring expense, however relatively a part of the price of the brand new residence. If he had not made the PTT fee, he couldn’t have bought his new dwelling.

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The taxpayer readily acknowledged that the restrictions within the Tax Act do apply to his case, however he felt the tax provisions violate his equality rights underneath the Canadian Constitution of Rights and Freedoms as a result of they’re, in his phrases, “under-inclusive, resulting in antagonistic impression discrimination on the bottom of incapacity.” Moreover, he mentioned the tax guidelines, as drafted, “infringe his proper to equality underneath … the constitution … as a result of Parliament failed to think about the wants and circumstances of individuals with disabilities.”

The constitution prohibits discrimination on the premise of “race, nationwide or ethnic origin, color, faith, intercourse, age or psychological or bodily incapacity.” However because the Supreme Court docket of Canada concluded in a 1995 case, “discrimination won’t end result from each distinction or distinction in therapy. The Earnings Tax Act makes distinctions by numerous statutory necessities, in an try to generate authorities income whereas balancing numerous financial and social insurance policies. On this context, the correct to the equal good thing about the legislation doesn’t imply that every taxpayer has an equal proper to obtain the identical quantities, deductions, or advantages.”

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In different phrases, simply because the Earnings Tax Act has numerous guidelines that profit sure people, the foundations don’t violate a taxpayer’s constitution rights as a result of they don’t discriminate on the premise of any of the situations listed within the constitution, since they apply to all taxpayers.

The decide additionally famous, citing a previous case, that the METC “being a large-scale profit program, can’t take note of each taxpayer’s wants … (it) doesn’t permit the (taxpayer) to deduct all medical bills that relate to (their) particular person wants. Nonetheless, this was by no means the supposed objective of (the METC).”

The decide concluded that the taxpayer’s problem “can’t succeed as a result of no taxpayer is permitted to say the (METC) for the acquisition of a brand new residence.” In impact, the taxpayer was in search of a profit that’s not offered to anybody underneath the Earnings Tax Act.

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The taxpayer then argued that if the PTT didn’t qualify as a medical expense, it ought to be allowed underneath the basic transferring expense deduction. However the CRA disallowed this as a result of the taxpayer didn’t transfer 40 kilometres nearer to a brand new work or college location, which is a required situation within the act to deduct transferring bills.

The taxpayer took problem with this distance requirement on the premise that there is no such thing as a consideration of whether or not 40 kilometres is an acceptable distance. He acknowledged that folks with disabilities might encounter difficulties that aren’t linked to distance, such because the time it could take to journey between areas and entry to acceptable transportation companies. In overlooking this consideration, the taxpayer argued that Parliament not directly discriminated in opposition to people with disabilities.

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Once more, the decide disagreed, noting the taxpayer’s failure to qualify for the transferring expense deduction was not primarily based on his incapacity, however on the actual information of his case. Merely put, there was no new work or college location, and his new dwelling was solely 13 kilometres nearer to his workplace.

In the long run, the decide concluded that there was “no discrimination throughout the which means … of the constitution as a result of there is no such thing as a distinction primarily based on incapacity, both immediately or not directly. The provisions at problem apply to all taxpayers primarily based on their particular, particular person circumstances. Parliament just isn’t required to offer tax advantages that meet the wants of all taxpayers.”

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The taxpayer additionally claimed $50.39 for heating pads and $64.96 for wheelchair gloves. The decide dismissed the declare for heating pads since they don’t seem to be a listed medical system underneath the record of qualifying medical bills, however in a minor victory for the taxpayer, did permit the METC for the wheelchair gloves on the premise that the taxpayer makes use of the gloves in respect of a listed medical system, particularly, his wheelchair.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

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