As you complete your 2024 tax return, which for most of us is due at the end of the month, one of the more popular tax credits you may be entitled to claim is the medical expense tax credit (METC). This credit is intended to provide tax relief for qualifying above-average medical or disability-related expenses incurred by individuals on behalf of themselves, a spouse or common-law partner, or a dependent relative.
But not all medical expenses, even if recommended by a medical practitioner, will qualify. Take the recent case of an Ontario taxpayer who attempted to claim the cost of a swimming pool as a medical expense.
In 2022, the taxpayer and his spouse purchased and installed in his backyard a TidalFit Pro EP-15 Exercise Pool, which was purchased as an exercise aid for their son who was diagnosed with Duchenne muscular dystrophy (DMD). The facts of the case are, as the judge noted, “tragic,” as the life expectancy of the couple’s child’s is not expected to extend beyond age 20.
Their son has been undergoing treatment through The Hospital for Sick Children in Toronto since his diagnosis. His nurse practitioner wrote a letter that outlined the symptoms and implications of a diagnosis of DMD, and in it she “strongly recommend(s) swimming as a safe and effective therapy to help promote muscle strength and functioning.”
The letter was written in reference to her support for the couple’s purchase of a pool for their son to exercise in, due to the COVID-19 restrictions imposed in March 2020. The taxpayer testified that prior to the purchase of the exercise pool, their son would swim in community pools or in friends’ pools.
The taxpayer purchased the pool in 2022 for a total cost of $53,674. The pool resembles a large hot tub, in that it is longer than it is wide, has grab bars and is heated. In addition, it has jets that enable a person to swim in place against the current generated.
The taxpayer testified that the pool was used almost exclusively by his son. But the taxpayer conceded that this type of pool could also be used by able-bodied individuals who could exercise by swimming against the current generated by the pool’s jets.
The taxpayer attempted to claim the $53,674 cost of the pool as a medical expense on his 2022 tax return, but in June 2023, the Canada Revenue Agency denied the credit. The taxpayer objected, but the assessment denying the METC was subsequently confirmed by the CRA on the basis that the exercise pool in question was “not considered a medical device,” and was of a type that the general public could choose to purchase for recreational use, absent any “severe and prolonged mobility impairment.”
The Income Tax Act permits a wide range of eligible medical expenses and includes such expenses as prescription drugs, dental work and medical devices or equipment. For medical equipment to qualify, however, the specific equipment must be listed in the Income Tax Regulations. While there is an exhaustive list of prescribed medical devices, including items such as a pacemaker, orthopedic shoes, a hospital bed, and a walker (among many others); swimming pools are not on the list.
The Tax Act, however, also permits individuals to claim “reasonable expenses relating to renovations or alterations to a dwelling of the patient who lacks normal physical development or has a severe and prolonged mobility impairment, to enable the patient to gain access to, or to be mobile or functional within, the dwelling, provided that such expenses are not of the type that would typically be expected to increase the value of the dwelling, and are of a type that would not normally be incurred by persons who have normal physical development or who do not have a severe and prolonged mobility impairment.”
Could the installation of a swimming pool potentially qualify as an eligible renovation?
In the past, possibly. Indeed, before the law was changed about 20 years ago, a wide variety of home renovations were found by the courts to be eligible for the METC, including the installation of hot tubs and hardwood flooring, in appropriate circumstances.
For example, a 2004 tax court case involved a taxpayer who was on long-term disability and suffered from several serious medical conditions including clinical depression and bi-polar disorder. He purchased a hot tub on the recommendation of his psychiatrist, who recommended hydrotherapy to provide “deep relaxation for depression and anxiety.” While the judge did not allow the actual cost of the hot tub as a medical expense, he did allow the cost of the installation of the hot tub.
As for hardwood floors, a June 2003 case involved a taxpayer suffering from severe allergies who had his carpeting removed and installed hardwood floors “to remove sources of mould in the house.” The judge concluded that the $11,000 cost qualified as an eligible renovation expense for purposes of the METC.
In direct response to these, among other cases, the Income Tax Act was amended to introduce the current two-criteria test for determining whether home renovation expenses qualify for the METC. First, the expense must not typically be expected to increase the value of the home; second, the expense must be something that would not typically be undertaken by someone without a mobility impairment.
As the 2005 budget document noted, allowing general renovation expenses “goes far beyond the policy intent of the [METC] because it subsidizes renovation expenses that increase the value of the home, and extends tax recognition to expenses with a substantial element of personal consumption and personal choice.”
In the current case, while the judge may have been able to accept that the pool didn’t increase the value of the couple’s home, the pool “was available for purchase by any member of the public and could … be used by able-bodied individuals as a swimming training aid.” As a result, the cost of the pool simply doesn’t qualify as a medical expense under the current definition of eligible renovations.