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Canadians are fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Such plans are not, however, comprehensive, and there is consequently a large (and growing) number of medical and para-medical costs — including dental care, prescription drugs, physiotherapy, ambulance trips, and many others — which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from such coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a medical expense tax credit to help offset out-of-pocket medical and para-medical costs which must be incurred.

Canadians are fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Such plans are not, however, comprehensive, and there is consequently a large (and growing) number of medical and para-medical costs — including dental care, prescription drugs, physiotherapy, ambulance trips, and many others — which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from such coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a medical expense tax credit to help offset out-of-pocket medical and para-medical costs which must be incurred.

The bad news for such individuals is that while a tax credit is available, the computation of eligible expenses and determining when a claim for the credit should be made can be confusing. In addition, the determination of which expenses qualify for the credit and which do not isn’t necessarily intuitive, nor is the determination of when it’s necessary to obtain prior authorization from a medical professional in order to ensure that the contemplated expenditure will qualify for the credit. For instance, in order to claim the medical expense tax credit for the cost of a walker, it is necessary to obtain a prescription for that walker from a doctor. Where costs are incurred to purchase a wheelchair, those costs are eligible for the medical expense credit, with no requirement that a prescription be obtained.

The basic rule is that qualifying medical expenses (a lengthy list of which can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return.html) over 3% of the taxpayer’s net income, or $2,421, whichever is less, can be claimed for purposes of the medical expense tax credit on the taxpayer’s return for 2021.

Put in more practical terms, the rule for 2021 is that any taxpayer whose net income is less than $80,700 will be entitled to claim medical expenses that are greater than 3% of his or her net income for the year. Those having income of $80,700 or more will be limited to claiming qualifying expenses which exceed the $2,421 threshold.

The other aspect of the medical expense tax credit which can cause some confusion is that it’s possible to claim medical expenses that were incurred prior to the current tax year but weren’t claimed on the return for the year that the expenditure was made. The actual rule is that the taxpayer can claim qualifying medical expenses incurred during any 12-month period which ends in the current tax year, meaning that each taxpayer must determine which 12-month period ending in 2021 will produce the greatest amount eligible for the credit. That determination will obviously depend on when medical expenses were incurred so there is, unfortunately, no universal rule of thumb that can be used.

Medical expenses incurred by family members — the taxpayer, his or her spouse, children who were born in 2004 or later, and certain other dependent relatives — can be added together and claimed by one member of the family. In most cases, making that claim on the tax return of the lower income spouse is best, in order to maximize the amount claimable, where that spouse has tax payable for the year.

As the end of the calendar year approaches, it’s a good idea to add up the medical expenses which have been incurred during 2021, as well as those paid during 2020 and not claimed on the 2020 return. Once those totals are known, it will be easier to determine whether to make a claim for 2021 or to wait and claim 2021 expenses on the return for 2022. And, if the decision is to make a claim for 2021, knowing what medical expenses were paid, and when, will enable the taxpayer to determine the optimal 12-month period for that claim.

Finally, it’s a good idea to look into the timing of medical expenses which will have to be paid early in 2022. Where those are significant expenses (for instance, a particularly costly medication which must be taken on an ongoing basis, or some expensive dental work) it may make sense, where possible, to accelerate the payment of those expenses to December 2021, where that means they can be included in 2021 totals and claimed on the 2021 return.

Working from home — and certainly work from home arrangements on the scale experienced over the past 19 months — would not be practically possible without the use of technology. And of all the available technology, cell phones and internet service are the two essentials without which work-from-home arrangements almost literally can’t function.

Working from home — and certainly work from home arrangements on the scale experienced over the past 19 months — would not be practically possible without the use of technology. And of all the available technology, cell phones and internet service are the two essentials without which work-from-home arrangements almost literally can’t function.

Almost everyone, of course, already had a cell phone and at-home access to the internet when work-from-home arrangements became necessary. However, when workplaces closed and employees began working from home on a massive scale early in 2020, it soon became apparent that most employees would need to upgrade their existing services to meet the demand resulting from one (or more) family members working from home or engaged in online schooling.

In some cases, the employer was prepared to subsidize those increased costs, or even to cover cell phone and internet costs entirely. Such an arrangement, however, raises the question of when employer-provided cell phones and internet service are simply the tools needed by an employee to do his or her job — and when they become more than that and constitute benefits to the employee, which must be included in income, and on which tax must be paid.

Not surprisingly, the Canada Revenue Agency (CRA) has formulated and issued an assessing policy on the circumstances in which taxable benefits arise. And, perhaps also not surprisingly, given the wide range of cell phone and internet service plans available, that assessing policy is a bit complicated. And, most important from the employee’s point of view, the way in which an employer pays for (or reimburses) an employee’s cell phone and internet costs can by itself determine whether such assistance has no tax consequences or becomes a taxable benefit and/or income in the hands of the employee.

There are several types of costs involved in acquiring and using a cell phone and using internet service, as follows, and each has its own set of tax consequences.

The first cost is that of acquiring a cell phone. If the employer purchases a cell phone and provides it to the employee to enable them to carry out their employment duties, the cost of that cell phone is not a taxable benefit to the employee. However, if the employee purchases the phone and is then reimbursed by the employer for that cost, the fair market value of that cell phone is a taxable benefit to the employee — and that taxable benefit is assessed even if the employee uses the phone for employment-related purposes.

The next category of cell phone related costs is that of a cell phone service plan, of which there are an almost limitless range of options at different cost levels. Where an employer pays for (or reimburses) the cost of the employee’s cell phone plan, the portion of the cost attributable to employment-related cell phone use does not, reasonably enough, create a taxable benefit to the employee. Where (as would most often be the case) the cell phone is used for both employment and personal purposes, the portion of the cost attributable to personal use is treated as a taxable benefit to the employee, unless the employee reimburses the employer for that personal use portion.

In order to make that allocation, of course, it would be necessary to calculate the number of minutes of cell phone use that was attributable to personal use and that which was used for employment-related purposes. The amount of record keeping required to do so is likely more than most employees and employers would be willing to undertake. In recognition of that reality, the CRA has arrived at a reasonable administrative policy to deal with the issue. Under that policy, an employee’s personal use of an employer-paid cell phone plan will not result in a taxable benefit to the employee if all of the following three criteria are met:

• the cost of the plan is reasonable;
• the plan is a basic plan with a fixed cost; and
• the employee’s personal use of the service does not result in charges that are more than the basic plan cost.

In light of the administrative positions and policies put forward by the CRA, the best way to avoid unwanted tax consequences would seem to be for the employee to use a cell phone provided by the employer, to have the employer buy a fixed-price plan which provides the most generous airtime provision that can be justified by the employee’s employment-related use of the phone, and to keep the total business and personal use minutes under the basic airtime limit. Where that’s the case it won’t matter, in any given month, what the allocation between personal and employment use is.

Unfortunately, the CRA has not formulated a similar administrative policy with respect to employer-paid internet services at home. Where the employer pays for (or reimburses the employee for) the cost of an internet service at home to help the employee carry out employment duties, only the portion of that service used for employment purposes is not a taxable benefit. Put another way, where personal use is made of an employer-provided at-home internet service, the portion of the cost attributable to that personal use will (unless the employee is reimbursed by the employer for such costs) result in a taxable benefit to the employee. How such allocation is to be arrived at, as a practical matter, is a question left up to the employer, who must be prepared to determine both the percentage of employment use and the fair market value of that use and, if asked, to justify the position taken to the CRA.

One final note — where the employer provides an employee with an allowance for cell phone or internet services, that allowance must, in all circumstances, be included in the employee’s income for the year.

Throughout the pandemic, the federal government has provided businesses with a number of support programs, some of which operated to subsidize the wage and rental costs of those businesses. Some of those programs were scheduled to expire on November 20, 2021; however, in its most recent announcement made October 21, 2021, the federal government indicated that one program — the Canada Recovery Hiring Program (CRHP) — would be extended, possibly until July 2, 2022. In addition, two new programs will be implemented to address the needs of businesses in sectors particularly hard hit by the pandemic. The affected programs are as follows.

Throughout the pandemic, the federal government has provided businesses with a number of support programs, some of which operated to subsidize the wage and rental costs of those businesses. Some of those programs were scheduled to expire on November 20, 2021; however, in its most recent announcement made October 21, 2021, the federal government indicated that one program — the Canada Recovery Hiring Program (CRHP) — would be extended, possibly until July 2, 2022. In addition, two new programs will be implemented to address the needs of businesses in sectors particularly hard hit by the pandemic. The affected programs are as follows.

Canada Recovery Hiring Program

The CRHP, which was scheduled to expire on November 20, 2021, provides qualifying employers with a wage subsidy. Generally, qualifying employers are those who have experienced a revenue loss of at least 10%, as measured against a baseline period of March 14 to April 10, 2021. The subsidy rate for the October 24 to November 20, 2021 period was set at 20%.

The latest government announcement proposes some changes to the CRHP. First, the subsidy rate for the October 24 to November 20, 2021 period is to be increased to 50%. Second, the CRHP will be extended (at the new subsidy rate of 50%) until at least May 7, 2022. The federal government may opt to further extend the program until July 2, 2022.

Under the proposed extension, the existing baseline period of March 14 to April 10, 2021, would continue to be used in calculating the benefit. The existing eligibility rules would also continue to apply, including the required revenue decline of more than 10%.

Tourism and Hospitality Recovery Program

Few sectors of the economy have been hit harder by the pandemic than tourism and hospitality. In light of that reality, the federal government will be introducing the Tourism and Hospitality Recovery Program. That program will provide support to hotels, tour operators, travel agencies, and restaurants, by providing wage and rent subsidy programs.

Hardest-Hit Business Recovery Program

The second new program to be introduced is not sector-specific but instead focuses on any business which has experienced and continues to experience significant revenue loss.

In order to be eligible for the Tourism and Hospitality Recovery Program, a business must demonstrate an average monthly 40% revenue reduction between March 2020 and February 2021, as well as a current-month revenue loss of at least 40%. For purposes of the Hardest-Hit Businesses Recovery Program, revenue reductions for the comparable periods must be at least 50%.

The benefit rate which may received under each program is also different. Under the Tourism and Hospitality Recovery Program, the maximum subsidy rate is 75%. That maximum rate under the Hardest-Hit Businesses Recovery Program is 50%.

In addition, businesses which are affected by temporary new local lockdowns may be eligible for support at the same subsidy rates which are available through the Tourism and Hospitality Recovery Program. Those subsidy rates will be provided throughout the period of the lockdown, regardless of whether the business has previously experienced revenue losses during the pandemic.

Businesses which are eligible for either of the Tourism and Hospitality Recovery Program or the Hardest-Hit Businesses Recovery Program will also both be eligible for the Canada Emergency Rent Subsidy at an enhanced rate. Under current rules, there is a monthly cap on eligible expenses that can be claimed under the Canada Emergency Rent Subsidy of $75,000 per business location and $300,000 in total for all locations. As part of the October 21 announcement, the federal government indicated that the monthly cap would (for businesses eligible for benefits under either the Tourism and Hospitality Recovery Program or the Hardest-Hit Businesses Recovery Program) be increased from $300,000 to $1 million, starting on October 24, 2021.

Both the Tourism and Hospitality Recovery Program and the Hardest-Hit Businesses Recovery Program will be available until May 7, 2022, with the proposed 75% and 50% subsidy rates, respectively, available through to March 12, 2022. From March 13, 2022, to May 7, 2022, the subsidy rates will decrease by half.

Details of the two new programs, including benefit periods and applicable subsidy rates,  can be found on the federal government website at https://www.canada.ca/en/department-finance/news/2021/10/targeting-covid-19-support-measures.html. Details of the Canada Recovery Hiring Program are available on the same website at https://www.canada.ca/en/revenue-agency/services/subsidy/recovery-hiring-program.html.

Since the Canada Recovery Benefit (CRB) replaced the Canada Emergency Response Benefit (CERB) just over a year ago, more than 2 million individual Canadians have applied for the CRB, a benefit which paid $900 (pre-tax) per week until July 17 of this year, and $600 (pre-tax) per week thereafter. For the most recent benefit period for which figures are available (September 12-25, 2021), 821,560 Canadians received the CRB. In total, just over $27 billion in CRB amounts have been issued by the federal government since October 2020.

Since the Canada Recovery Benefit (CRB) replaced the Canada Emergency Response Benefit (CERB) just over a year ago, more than 2 million individual Canadians have applied for the CRB, a benefit which paid $900 (pre-tax) per week until July 17 of this year, and $600 (pre-tax) per week thereafter. For the most recent benefit period for which figures are available (September 12-25, 2021), 821,560 Canadians received the CRB. In total, just over $27 billion in CRB amounts have been issued by the federal government since October 2020.

It had been previously announced that the CRB program would end on Saturday October 23, 2021. While there was some speculation that the program would be wound down in a gradual way, such is not the case. On October 21, the federal government announced that the CRB would end on October 23, and that there would be no new general pandemic relief program for individuals to replace it. The government did announce that a new Canada Worker Lockdown Benefit (CWLB) would be implemented, but benefits under that program will be provided only on a localized basis, in areas where government authorities order a general lockdown for pandemic-related reasons.

Details of the new benefit are still to be announced; however, the federal government announcement made on October 21 did provide the following information. The CWLB will be

• $300 a week;
• strictly available to workers whose work interruption is a direct result of a government-imposed public health lockdown;
• available until May 7, 2022, with retroactive application to October 24, 2021 should the situation warrant it;
• accessible for the entire duration of a government-imposed public health lockdown (up until May 7, 2022);
• available to workers who are ineligible for Employment Insurance (EI) and those who are eligible for EI, as long as they are not paid benefits through EI for the same period. 

Two other individual pandemic relief programs which were also scheduled to end on October 23 have, however, been extended. The Canada Recovery Sickness Benefit (CRSB) and the Canada Recovery Caregiving Benefit (CRCB) are both extended to be available until May 7, 2022. In addition, the maximum duration of benefits under both plans has been extended.

The Canada Recovery Sickness Benefit of $500 (pre-tax) per week is available to individuals who

• are unable to work for at least 50% of the week because they contracted COVID-19, or have been advised to self-isolate for reasons related to COVID-19; or
• have underlying conditions, are undergoing treatments, or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, or government or public health authority, would make them more susceptible to COVID-19.

The CRSB is currently available for a maximum of 4 weeks. Effective as of October 24, 2021 and until May 7, 2022, that eligibility is extended by 2 weeks, to be available for a maximum of 6 weeks.

The CRCB is provided to those who must stay home to care for an ill or vulnerable relative. The benefit of $500 (pre-tax) per week per household is applicable where an individual is unable to work for at least 50% of the week because:

• they must care for a child under the age of 12 or family member who needs supervised care, because schools, day-cares, or care facilities are closed due to COVID-19; or

• the child or family member is sick and/or required to quarantine or is at high risk of serious health implications because of COVID-19.

The CRCB was previously available for a maximum of 42 weeks. Effective as of October 23, 2021 and until May 7, 2022, that eligibility period is extended to 44 weeks.

While Canadians who are (or may become) eligible for either the Canada Sickness Recovery Benefit or the Canada Caregiving Recovery Benefit can be assured that such benefits will continue to be available for almost another seven months, current recipients of the Canada Recovery Benefit are faced with the immediate need to replace income received from that program. Those recipients should be aware that, while the program ended on October 23, 2021, applications for CRB amounts for benefit periods up to that date can still be made. Each CRB application is made for a particular two-week period, and applications for a particular period can be made up to 60 days after the end of that period. Consequently, applications for the final CRB period of October 10 to 23, 2021 can be made until December 22, 2021.

Finally, the application period for a number of prior CRB benefit periods still remain open. A listing of the benefit periods for which application can still be made, together with information on the applicable deadlines and the application process can be found on the federal government website at https://www.canada.ca/content/canadasite/en/revenue-agency/services/benefits/recovery-benefit/crb-periods-apply.html#h-2.

Information on the changes to existing individual pandemic benefit programs is available on the same website at https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals.

Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.