If you travel to warmer climes to escape Canada's frigid winter weather, even on the advice of your doctor, the cost of your travel is not a valid medical expense.
Earlier this month, the Federal Court of Appeal overturned a favourable 2014 decision of the Tax Court of Canada. The lower court ruled that a Thunder Bay woman was justified in claiming the medical expense tax credit (METC) for nearly $18,000 in travel expenses, including airfares, accommodations and meals, for her and her husband for a trip they made to Thailand and Indonesia in 2009.
The taxpayer suffers from temporomandibular joint dysfunction, a debilitating condition that led to the replacement of her affected joints by prosthetic devices, which are adversely affected by the cold winter temperatures, especially in northern Ontario.
To alleviate her condition, the taxpayer and her husband spend their winters in warmer countries, having travelled in recent years to Thailand, Indonesia, Cambodia, Vietnam, Malaysia, Philippines, Burma, Ecuador, Venezuela, Honduras, Mexico and Costa Rica.
One of the taxpayer's doctors said that she had "no choice but to seek a warmer climate during the coldest six months of the year." Another doctor recommended that, when travelling to warmer climates, her husband should accompany her as a travel companion.
Under the Income Tax Act, you can claim the METC for amounts paid to a "medical practitioner ... or a ... hospital in respect of medical ... services provided to a person." In certain limited situations, you can also deduct the cost of transportation, meals and accommodation if you have to travel to obtain these medical services.
Essentially, in order to deduct transportation as a medical expense, the medical services must not be available in the local community, the place of travel must be located more than 40 kilometres from the patient's home (80 kilometres if you want to deduct travel expenses other than transportation), the route taken must be a direct route, and "it must be reasonable for the taxpayer to travel to that place to obtain the services." In certain cases a companion's travel expenses may also qualify for the METC provided a medical practitioner has certified that the taxpayer can't travel without assistance.
The CRA said that the taxpayer's travel costs simply don't qualify for the METC because the taxpayer "incurred such costs to obtain the salutary effects of the warm climate in Thailand and Indonesia and not to obtain medical services from medical practitioners or hospitals in those countries." Indeed, testimony from the taxpayer's spouse confirmed that the taxpayer did not, in fact, travel to these countries to access medical services that are not available in Canada, but for the climate.
The Appeal court looked at the legislative history of the provision that allows travel costs as a medical expense, which was added back in 1973. The budget speech at that time found that the purpose of this new rule was "to assist people in remote or rural areas or people requiring specialized treatment in distant centres."
The court therefore concluded that the taxpayer's $18,000 of travel expenses were not eligible for the METC. As the Judge wrote, "Parliament intended to provide fiscal support, through the METC, to Canadians who are required to travel from their home communities to other locations in order to access specialized medical services that are not available to them where they live. That said, the circumstances in which such fiscal support will be available have been carefully circumscribed by the limitations.... Such limitations cannot be ignored or relaxed in the face of sympathetic circumstances."