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Tax implication response

We sometimes receive questions from families asking if the services/programs their child receives through ISAND have tax implications for them. We asked our tax advisors to try to summarize the tax impact associated with a family’s involvement with Programs and Services at ISAND. As the information provided is general in nature, it will not be applicable to everyone. Please seek advice from an accountant or tax specialists to make sure your individual circumstances are considered.

This information highlights the three areas of: Disability Tax Credits; Childcare Expense Deduction; and Medical Expense Tax Credits.

Disability tax credit and other associated benefits

Whether a child can qualify for the disability tax credit depends on whether they have a disability which fits with CRA’s criteria for claiming the credit and other associated benefits. A child’s participation in an intervention program along with reports and documentation provided by ISAND will support the application for the disability credit. However, it is mainly the responsibility of the qualified medical practitioner who is completing the application on behalf of the parents to attest to the child’s disability.

Childcare expense deduction

The general requirements for an expense to qualify as deductible childcare expenses include the following:

  1. Eligible child – The child for whom the expense was incurred must be a child or dependent of the taxpayer or their spouse
  2. Expenses to enable undertaking of specific activities – The expense must enable the taxpayer or a supporting person residing with the eligible child to:
    • Perform duties of employment
    • Carry on business
    • Carry on research for which a grant is received
    • Attend secondary school or a designated educational institution
  3. Provider of childcare services – The expense must be incurred for services rendered for the care of children, certain items are listed as eligible. Below are some expenses which appear to be possibly relevant to ISAND Programs/Services:
    • Eligible childcare provider (i.e. Certain individuals or organization providing child care services)
    • An education institution for the purpose of providing childcare
  • This is not an exhaustive list of deductible expenses, and there are specific exclusions such as:
    • Amounts that would qualify for the medical expense credit (Discussed later on)
    • Cost of clothing, transport, or education, and
    • Cost of board and lodging, unless included in fees of a sports school, boarding school or summer camp, subject to certain limits

Whether any portions of program costs can be attributed to services for childcare rather than for medical (therapeutic) services or educational services will need to be determined.

Medical expense tax credit

Whether costs of the programs or services can be eligible for medical expense tax credits is dependent on whether costs can be attributed to the work of health care professionals recognized by the CRA as qualifying medical practitioners for purposes of the medical credit.

Generally, medical practitioners authorized by specific legislation to practice are recognized by the CRA for purposes of the medical credit and include:

  • Clinical Psychologist – Eligible, if licensed to practice under provincial law (e.g. College of Psychologists of Ontario)
  • Speech Pathologist – Eligible, if licensed to practice under provincial law (e.g. Certified by the Canadian Association of Speech-Language Pathologists and Audiologists (CASLPA) or a provincial affiliate)
  • Occupational Therapist – Eligible, if licensed to practice under provincial law (e.g. Member of the Canadian Association of Occupational Therapists)
  • Board Certified Behaviour Consultants (BCBA) – BCBAs are soon to be regulated in Ontario under the College of Psychologists. As they are currently unregulated, they would not qualify for the medical expense tax credit but may become eligible after regulation in Ontario.
  • Registered Behavioral Therapist (RBT) – As RBTs work in the field of Applied Behavioral Analysis (ABA) which is yet to be regulated in Ontario, they would not qualify for the medical expense tax credit similar to BCBAs.

If a child is eligible for the disability credit, claiming therapy costs under the program as medical credits might become easier. A separate provision under the Tax Act allows for claiming medical credits on therapy costs for a patient with ‘severe and prolonged impairment’, along with other requirements one of which is the therapy must be prescribed by and administered under the general supervision of a medical doctor or psychologist. Determination of whether the service or program meets these criteria (assuming disability credit eligibility) would be based on the facts of the situation (e.g. level of involvement in the supervision by a psychologist) and not solely based on whether a prescribed medical practitioner is involved at all in the program.