What qualifies as a medical expense?

Hearing aids and shark cartilage are in, laser hair removal – ask your doctor

Figuring out what qualifies, and what doesn’t, as an eligible medical expense can sometimes be more of an art than a science. As more organizations move towards flexible benefits for employees, it’s important to get a handle on what items qualify as a legitimate expense.

An eligible medical expense for a health-care spending account is an expense that the Canada Revenue Agency (CRA) considers eligible for the medical expense tax credit under the federal Income Tax Act.

But no comprehensive list exists that outlines what the CRA will allow as an eligible medical expense. Subsection 118.2(2) of the act and section 5700 of the Income Tax Regulations list many of the basic items, but the inventory does not include many new health-care expenses or any interesting spins. Innovative issues have triggered some court cases and have been the subject of numerous technical interpretations issued by the CRA.

Here’s a look at some ordinary, and extraordinary, eligible medical expenses.

The basics

An amount paid to a medical practitioner, dentist, nurse or public or licensed private hospital in respect of medical or dental services is an eligible medical expense.

Medical practitioners include, but are not limited to, licensed or registered physicians, osteopaths, chiropodists, chiropractors, registered/licensed massage therapists, naturopaths, optometrists, psychoanalysts and psychologists.

The cost of drugs is a medical expense if the drugs are prescribed by a medical practitioner and recorded by a pharmacist. The purchase price of medical aids such as artificial eyes and limbs, wheelchairs, crutches, braces and hearing and speaking aids is covered under this category.

The cost of products such as catheters, colostomy pads, contact lenses, eyeglasses, needles and syringes are also considered eligible expenses. Reasonable travel and renovation costs may fall into this category.

The interesting

Hot tubs are not eligible medical expenses, as hot tubs or whirlpool baths are not prescribed under Regulation 5700 of the Income Tax Act. Even where there is a compelling medical or therapeutic reason for having a hot tub, thus far the CRA has ruled them out.

Nevertheless the cost of the renovations required to install a hot tub may qualify as a medical expense. In the case of an individual who lacks normal physical development or who has a severe and prolonged mobility impairment, reasonable expenses relating to renovations or alterations to the individual’s dwelling can be claimed as medical expenses.

So while the hot tub itself is not eligible, the costs of installation of hot tubs for persons who have severe and prolonged mobility issues may qualify if a medical practitioner prescribes treatments.

Acne facials, electrolysis and laser hair removal performed by an aesthetician or electrologist are not eligible medical expenses. Although the treatments may have been recommended by a physician, aestheticians are not qualified medical practitioners under the act. But if the acne facial, electrolysis or laser hair removal is performed by a medical practitioner or by a person employed by a medical practitioner, then the expense is eligible. Many dermatologists employ aestheticians who are trained in electrolysis and lasers, as well as acne treatments.

The CRA has stated that where a payment is made by a patient to a medical practitioner for skin treatment or hair removal that can be regarded as being in the nature of medical services, the payment would be a qualifying medical expense even if the service is performed by an employee of the medical practitioner.
Cosmetic procedures, if administered by a qualified medical professional, are most likely eligible expenses. The CRA has confirmed that an amount paid to a medical practitioner for surgery of any kind, whether cosmetic or electric, generally qualifies as a medical expense.

It is presumed that such surgery is beneficial to the patient’s health. This could include a hair transplant, facelift, liposuction, rhinoplasty or breast augmentation. Even an amount paid to a dentist for tooth bleaching would normally qualify as dental services, and accordingly be eligible as a medical expense for the purposes of the Income Tax Act.
Vitamins are health-care expenses that are rarely an eligible medical expense. Generally for drugs, ointments or other preparations to qualify as medical expenses under the act, they have to be prescribed by a medical practitioner and recorded by a pharmacist.

The growing popularity of alternative health-care providers has led to an increase in the use of vitamins, minerals, herbal remedies and supplements, but whether the costs of such substances are considered an eligible medical expenses depends on who prescribes them and if a pharmacist records the transaction. If a nutritional consultant or herbalist prescribes vitamin B12 and it is purchased over the counter, it is not an eligible expense.

But if a naturopath prescribes vitamin B12 and it is dispensed by a pharmacist, then it is an eligible medical expense. Note that vitamin B12 for pernicious anemia, prescribed by a medical practitioner, is eligible.

Surprisingly, medical identification bracelets are not eligible medical expenses. They can save a person’s life and costs for the health-care system, but as they do not fit into any category in the act, they are not eligible.

Experimental medical treatment abroad would probably be an eligible medical expense so long as the treatment is performed by a licensed health professional or at a licensed health institution. The medications used — such as shark fins and cartilage as a cancer treatment — would qualify if the use of these substances is prescribed by a medical practitioner and dispensed by a licensed pharmacist who records the prescription and issues a proper receipt.

Further, certain travel expenses may qualify as eligible medical expenses. The travel expenses must have been incurred for travelling to a destination to obtain medical services and must be reasonable. The patient must have travelled not less than 80 kilometres to obtain the medical services and substantially equivalent services must not have been available locally.

In British Columbia and Alberta, the only jurisdictions in Canada where the provincial health-care system is funded by premiums paid by individuals, the premiums are not considered eligible medical expenses. The CRA considers those expenses to be personal or living expenses so they do not qualify as eligible medical expenses. But premiums paid to a non-governmental medical or hospital care plan are an eligible expense.

While an eligible medical expense for a health-care spending account is one the CRA considers eligible for the medical expense tax credit, the medical expense need not be for an item or service that is medically necessary. Identical medical expenses may be eligible expenses under the act in one situation and not another. The CRA has a set of ever-changing positions for the ever-changing health-care products and procedures on the market.

The best way to know if a questionable medical expense would qualify is to consider who is providing and recording it — if it is a legitimate medical practitioner, chances are it will be eligible. But if there is any doubt, contact the CRA to discuss the matter. Never rule out the possibility that something will qualify, as it appears the CRA is constantly broadening and reinterpreting the definition of eligible medical expenses.

Shelly Shapero is a research consultant for Aon Consulting in Toronto. She can be reached at (416) 542-5615 or [email protected].

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