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

Jamie Golombek: Choose says taxpayer was looking for a profit that isn’t supplied to anybody below the Revenue Tax Act

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With mere days to go earlier than the Canada Income Company‘s Could 1 common private tax submitting deadline, this weekend is your last probability to collect all these slips and backup documentation you’ll must file your return on time. Among the many receipts you’ll need to observe 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 might be claimed for medical bills that weren’t coated by your provincial, group or personal medical health insurance plan. In your 2022 return, the METC is on the market supplied your loved ones’s whole medical bills exceed a minimal threshold equal to the lesser of three per cent of your web earnings or $2,479 (for 2022). You too can declare a provincial/territorial credit score, with the minimal earnings thresholds various by jurisdiction. Qualifying bills embody these you paid for your self, your partner or companion, and your children below age 18.

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A current tax case reveals the challenges one Vancouver-area taxpayer confronted when making an attempt 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 circumstances 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 shifting bills associated to shifting provides and the price of a mover. The CRA, nevertheless, disallowed his declare for a property switch tax (PTT) cost of $17,600 on the acquisition of the brand new dwelling, on the idea that the $2,000 restrict, specified within the Revenue Tax Act for claiming shifting 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. Probably the most viable possibility for him was to purchase one other dwelling and transfer. Consequently, he argued that the PTT cost was not a shifting expense, however quite a part of the price of the brand new residence. If he had not made the PTT cost, 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 below the Canadian Constitution of Rights and Freedoms as a result of they’re, in his phrases, “under-inclusive, resulting in adversarial impression discrimination on the bottom of incapacity.” Moreover, he stated the tax guidelines, as drafted, “infringe his proper to equality below … 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 idea 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 consequence from each distinction or distinction in therapy. The Revenue Tax Act makes distinctions by means of numerous statutory necessities, in an try to generate authorities income whereas balancing numerous financial and social insurance policies. On this context, the proper to the equal advantage of 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 Revenue Tax Act has numerous guidelines that profit sure people, the principles don’t violate a taxpayer’s constitution rights as a result of they don’t discriminate on the idea of any of the circumstances 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 have in mind 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 goal 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 looking for a profit that isn’t supplied to anybody below the Revenue 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 below the common shifting 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 shifting bills.

The taxpayer took concern with this distance requirement on the idea that there is no such thing as a consideration of whether or not 40 kilometres is an acceptable distance. He acknowledged that individuals with disabilities might encounter difficulties that aren’t related to distance, such because the time it could take to journey between places and entry to acceptable transportation providers. 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 shifting expense deduction was not primarily based on his incapacity, however on the actual details of his case. Merely put, there was no new work or college location, and his new dwelling was solely 13 kilometres nearer to his place of job.

Ultimately, the decide concluded that there was “no discrimination inside the which means … of the constitution as a result of there is no such thing as a distinction primarily based on incapacity, both instantly or not directly. The provisions at concern apply to all taxpayers primarily based on their particular, particular person circumstances. Parliament shouldn’t be required to supply 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 machine below the record of qualifying medical bills, however in a minor victory for the taxpayer, did permit the METC for the wheelchair gloves on the idea that the taxpayer makes use of the gloves in respect of a listed medical machine, specifically, his wheelchair.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto.


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