written on behalf of Feigenbaum Law
Many Canadians look to downsize their homes, particularly as they grow older and no longer have children living at home or if they have excess space they no longer need. For others, downsizing may be appropriate due to the physical limitations they experience as they age. However, regardless of the reason for moving, purchasing a new home can come with substantial expenses that quickly add up.
In a recent case heard by the Tax Court of Canada, a taxpayer believed that the denial of certain moving expenses on his tax return amounted to discrimination. This case allowed the Court to consider and discuss how the Canadian Charter of Rights and Freedoms (the “Charter”) applies to the Income Tax Act for personal tax compliance.
The case of Breen v. The King began in 2018 when the taxpayer and his wife incurred expenses in their move from a two-story home into a single-story home to help accommodate the taxpayer’s mobility limitations related to his disability. When the taxpayer submitted his annual tax return, he claimed a medical expense tax credit for expenses related to the home purchase, which included an expense related to the property transfer tax payment. This claim was denied because the Income Tax Act only allows a claim of up to $2,000 allocated to moving expenses.
While the taxpayer acknowledged that he did face statutory limitations, he argued that the provisions in the Income Tax Act violated his equality rights under the Charter because they are “under-inclusive, leading to adverse impact discrimination on the ground of disability.”
The Income Tax Act does not allow for significant moving expenses claims, except for those who move a distance of over 40 kilometres to reside closer to work or school.
In this case, the taxpayer sought to recover costs of $31,598 resulting from expenses related to renovations to the new home of $26,281.90 and the property transfer tax payment of $17,600.
The taxpayer relied on subsection 15(1) of the Charter, which reads:
“15(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.”
In its analysis, the Court noted that in determining whether the Income Tax Act discriminates against an individual, it is important to bear in mind that not every distinction or difference in treatment amongst people will result in a finding of discrimination. While the Income Tax Act does make certain distinctions, the Court wrote that the legislation does so in an attempt to generate revenue for the government while balancing a wide range of economic and social policies.
The Court found that, under this context, there was no direct line between equal benefit under the law and the right to receive the same amounts, deductions, or benefits. The Court also noted that the Income Tax Act does not discriminate because the statutory requirements of the legislation applies to all taxpayers. In other words, everybody who pays taxes is subject to various limitations on what they can and cannot claim, although the details of what those claims include are different for each individual.
Court acknowledges that Income Tax Act does not specifically address certain expenses claimed by taxpayer
The taxpayer also argued that the silence of the Income Tax Act in relation to the new home purchase payments were a violation of his equality rights due to the violation of what the Income Tax Act fails to state or allow, as opposed to what the Act does state. The taxpayer told the Court that his own financial constraints prevented him from renovating his old home or building a new one and that the most viable financial option available to him and his wife was to relocate to a new residence.
The Court found that the taxpayer was correct in his findings that there was nothing in the Income Tax Act to allow for these expenses, but the Judge went on to add that “even if I accept that what he is proposing is not already covered in the moving expense category, he is seeking a benefit that is not provided to anyone under the Income Tax Act.”
The Court cited the case of Ali v. Canada, which dealt with a claim regarding a medical expense tax credit that was found to be discriminatory because it did not allow for the taxpayer to claim the cost of dietary supplements. In this case, the Federal Court of Appeal found that there was no discrimination as the exclusion of supplements is a limitation imposed on all taxpayers, not just those seeking to use them and claim them for one specific reason. However, in other cases, courts have held that there is no discrimination “with respect to a taxpayer’s inability to claim the medical expense tax credit for vitamins, organic food, supplements.”
In the case at hand, the Court was sympathetic to the issues and limitations faced by the taxpayer but denied his Charter arguments regarding discrimination because the provisions at issue do not systematically exclude people with a disability and are enforced equally to all taxpayers.
Whether you need help with personal tax planning or are looking for legal advice related to corporate taxes, Feigenbaum Consulting has extensive experience helping individual and corporate clients understand their tax obligations and take advantage of tax breaks where applicable. We help clients in both the United States and Canada and help clients manage their matters on both sides of the border. To speak with one of our team members regarding your questions about tax compliance and available credits, call us at (416) 468-7298