Can a person could income split their salary with his spouse to compensate her for talk therapy treatment she provides at home to their disabled son.

In a 2011 external interpretation, CRA stated its position as “No”. “Only expenses which are listed in subsection 118.2(2) of the Act qualify as medical expenses. Therapy expenses only qualify if the therapy is received by a person who qualifies for the disability tax credit under section 118.3 of the Act, and the therapy is provided by someone who is not the spouse or common-law partner of the person who is claiming the expense and who is 18 years of age or older, when the amounts are paid. The therapy has to be prescribed and supervised by a medical doctor, a psychologist (for a mental impairment), or an occupational therapist (for a physical impairment).”

CRA went further to offer the following comments.

"While it appears that most of the expenses you have described do not qualify for the METC, in accordance with paragraph 118.2(2)(l.9) of the Act, amounts paid for therapy may qualify for the METC if the therapy is received by a person who qualifies for the disability tax credit under section 118.3 of the Act, and the therapy is provided by someone who is not the spouse or common-law partner of the person who is claiming the expense and who is 18 years of age or older, when the amounts are paid. The therapy has to be prescribed and supervised by a medical doctor, a psychologist (for a mental impairment), or an occupational therapist (for a physical impairment). Subsection 118.4(2) of the Act applies to paragraph 118.2(2)(l.9) and thus requires that such practitioners be authorized to practice as such pursuant to the laws of the jurisdiction in which the service is rendered. For a list of expenses that qualify for the METC, please refer to subsection 118.2(2) of the Act, Interpretation Bulletin IT-519R2, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, and CRA Guide RC4064, Medical and Disability – Related Information.

When expenses do qualify for the METC, prescribed form T2201, Disability Tax Credit Certificate, must be filed with the tax return of the person who is claiming the credit. A qualified medical practitioner (usually a medical doctor) must certify on this form that the individual’s impairment is prolonged and that the effects of the impairment are such that the individual’s ability to perform a basic activity of daily living is markedly restricted. Before the income tax return is assessed, the form will be reviewed to determine if the person with the disability is eligible for the credit. When submitting the form, remember to include part A. If the impairment is permanent, it is not necessary to file another Form T2201 in later years unless the circumstances change or unless the form is requested. If the impairment is temporary, a new form must be submitted if the period stated on the certificate has ended.

There is no provision in the Act which allows a person to income split their salary with a spouse who stays at home to provide therapy treatment to a disabled child. Therefore, you are not able to income split your salary with your wife to compensate her for the talk therapy treatment she provides to your son. Please note that our position in this matter is based strictly on the legislative provisions of the Act. The role of the CRA is to administer and enforce the Act as passed by Parliament. As the primary responsibility for tax policy and legislative amendments rests with the Department of Finance, we would encourage you to contact the Tax Policy Branch of the Department of Finance and advise them of your concerns regarding income splitting and non-qualified medical expenses. It is our understanding that the Department of Finance is continually reviewing the legislation governing medical expenses to ensure that all proper costs incurred in connection with a medical disability are properly recognized for tax purposes. Should you wish to pursue your concerns further, you may write to the officials in the Tax Policy Branch at the Department of Finance, L’Esplanade Laurier, 140 O’Connor Street, Ottawa, Ontario, K1A 0G5.”