Education Tax Credits for Medical Residents
A recent decision in the Tax Court of Canada may allow Canadian medical residents additional education tax credits. Medical residency has long been a confusing tax issue. Even though residents have many characteristics of a full-time employee, they also possess many characteristics of a full-time student.
The decision in Kandasamy v. The Queen 2014 TCC 47 held that nine taxpayers, all medical residents, were eligible for the education and textbook tax credits under section 118.6 of the Income Tax Act even though they were full-time employees of a hospital.
Among the requirements of Subsection 118.6(2) is, that to be eligible for the credit, the taxpayer must be enrolled in a qualifying educational program as a full-time student at a designated educational institution. Each of the taxpayers in this case were attending the resident programs at their respective universities and were enrolled as full-time students there. Each of them were also working between 50 and 60 hours per week as employees in their respective teaching hospitals and earning employment income. All of the residents were issued T2202A (Tuition, Education, and Textbook Amounts Certificate) from the university responsible for administering the residency programs.
The Crown argued that the program was carried out by the hospital and not the university since the residents spent most of their time in the hospital. However, the Court noted that it was the faculties and schools of medicine, within the various Ontario universities, that accepted and rejected residency applications and selected teaching physicians.
The Crown also argued that the residents spent less than 10 hours per week in courses, as the academic courses attended by the residents were only 2 to 4 hours per month. This was deemed an incorrect interpretation of the legislation which actually says that at least 10 hours per week must be spent on courses or work and therefore the 50 to 60 hours per week the residents were working would qualify.
The decision is contrary to the CRA’s position that such programs are not qualifying educational programs but cases like this may force them to change their position. The Chief Justice also made a distinguishing factor for those articling students seeking to qualify for the Bar or accounting students who want to become Chartered Professional Accountants. The courses offered to legal and accounting students in Ontario are not “offered by designated educational institutions” as they are typically administered by professional bodies.