With the requirements for COVID-19 tests for entry into Canada and vaccines, the Canada Revenue Agency (CRA) was asked to comment on the availability of the medical expense tax credit (METC).
Medical expenses which are eligible for the METC are limited to those described in our tax rules. If a particular expenditure is not described as an eligible medical expense, or if the conditions under which the expenditure would qualify are not met, the expenditure will not qualify for purposes of the METC, even though the expenditure may have been incurred for medical reasons.
As a general rule, eligible medical expenses are not restricted to those paid in Canada or for medical services provided in Canada. Where reference in our tax rules is used in respect of a service rendered by a medical practitioner, the term includes individuals such as a medical doctor, pharmacist or nurse who is authorized to practice in the stated profession according to the laws of the land in which the service is rendered.
Eligible medical expenses include amounts paid for laboratory, radiological or other diagnostic procedures or services together with necessary interpretations:
- for maintaining health, preventing disease or assisting in the diagnosis or treatment of any injury, illness or disability;
- for the patient; and
- as prescribed by a medical practitioner.
The term “prescribe” is not defined in our tax rules; therefore, we generally rely on case law and the ordinary meaning (such as dictionary definitions). Namely, the verb “prescribe” means “[to] direct in writing,” or “recommend as something beneficial.” It is therefore generally the CRA view that our tax rules contemplate diagnostic procedures or services that are medically indicated or medically advisable.
Our tax rules allow the costs paid (with or without a prescription) for drugs, medicaments or other preparations or substances to qualify as medical expenses as long as they are prescribed for a patient by a medical practitioner. In their view, CRA said that they did not have the authority to waive the prescription requirement.
These costs may be significant and the tax relief may be welcome.