Jamie Golombek: Overseas care was cheaper than in a Canadian city for a rural taxpayer, but the travel costs were disallowed

Among the many non-refundable tax credits you may be able to claim on your personal tax return is the medical expense tax credit (METC). This is available if you’ve incurred eligible out-of-pocket medical and dental expenses, and may even include the cost of travel to obtain treatment. But claiming travel expenses for the purposes of the METC isn’t a sure thing, as one taxpayer found out in a tax case decided last month. Before delving into the details of the case, here’s a quick refresher of the METC rules and when travel expenses may be eligible for a claim.

The METC is a non-refundable tax credit that is worth 14 per cent federally, with each province and territory offering its own additional credit. The tax rules allow you to claim an METC for expenses you incurred for yourself, your spouse or partner, and your kids under age 18. Federally, you can claim an METC provided your family’s total medical expenses exceed a minimum threshold equal to the lesser of three per cent of your net income or $2,890 (for 2026). The provincial/territorial minimum income thresholds vary slightly. Because of these minimums it’s quite common for the lower-income spouse or partner to make the claim for the family.

To qualify, the medical service or item must be specifically listed as an “eligible” medical expense under the Income Tax Act. In certain limited situations, you may also be entitled to deduct the cost of “reasonable travel expenses” such as transportation, meals and accommodation if you have to travel to obtain these medical services.

But 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 one, 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 an METC provided a medical practitioner has certified the taxpayer can’t travel without assistance.

The recent tax case involved an Ontario taxpayer’s attempt to claim the METC for the cost of her husband’s travel expenses incurred in 2022 to obtain dental services abroad.

The taxpayer’s husband lives in North Bay, Ont. Prior to 2022 his dentist recommended that he seek treatment from a prosthodontist to obtain dental implants but because there was no prosthodontist in North Bay, the dentist told him that he would likely need to travel to Toronto.

After making various inquiries of clinics in Ontario, the patient obtained some estimates for the work that ranged between $30,000 to $60,000. In the end, however, he selected a clinic in Antalya, Turkey, to have the work done there, as it could all be done in one place and for substantially less money.

He travelled to Turkey in October 2022 to receive the initial treatment there during a 10-day visit. The dental specialists were in-house, including at least two prosthodontists, a periodontist and an endodontist. During this visit, a periodontist performed bone grafts, an endodontist did a root canal and prosthodontists inserted six dental implants and placed some temporary crowns. He also had a sinus lift.

As a result, the patient paid the equivalent of $8,536 for the cost of dental implant surgery abroad, which the Canada Revenue Agency permitted his wife to claim as a qualifying medical expense. She also attempted to claim a further $4,725 for her husband’s round-trip commercial airfare to and from Turkey, as well as $2,624 for accommodations abroad. The CRA disallowed the amounts paid for the airfare and accommodations.

The taxpayer objected to the assessment and the matter went to Tax Court, where the sole issue was whether the cost of the taxpayer’s husband’s travel expenses was considered a valid expense eligible for the METC.

The judge agreed that equivalent medical services were not available locally in North Bay, and that the taxpayer travelled to Türkiye on “a reasonably direct route.” The real issue, however, was whether “it is reasonable, having regard to the circumstances” to travel all the way to Turkey to obtain these medical services. As the judge noted, this wording “creates some ambiguity since it is not clear what factors are to be considered in assessing the reasonableness of the travel.”

Specifically, is affordability of medical services a factor in determining whether or not it’s reasonable to travel to obtain medical services?

The judge gave the example of two taxpayers, one living in rural Canada where no prosthodontist was practicing, and the other living in Toronto or Vancouver. Both taxpayers have the same dental treatment needs and the same financial circumstances. Does it make sense, asked the judge, that the patient who lives in a rural community can claim a METC for travel abroad to obtain cheaper dental services whereas someone who lives in a big city, with access to local dental expertise (albeit at a higher cost) cannot? As the judge wrote: “Did Parliament intend a two-tier system — one for patients living in remote, rural, or smaller centres and another for patients residing in large urban centres?”

Digging into the legislative history behind the rule, the judge noted that the purpose behind the ability to claim medical travel expenses was to provide support to rural Canadians who are required to travel from their home communities to other locations to access specialized medical services that are not available where they live, but only in limited and circumscribed circumstances. The intent was to support rural Canadians travelling to larger urban centres near the locality in which the patient resides.

The judge therefore concluded that “the personal affordability of the medical services that a patient requires is not a factor when considering the reasonableness condition,” and dismissed the taxpayer’s claim for travel-related medical expenses.

But we may not have heard the end of the story, as the taxpayer has filed an appeal with the Federal Court of Appeal. Stay tuned.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com.

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