Health Spending Accounts & Medical Planning

1. What provincial healthcare does not cover

• Dental care (except limited paediatric coverage; CDCP rollout 2024-25)
• Prescription drugs outside hospital (provincial drug plans have gaps)
• Vision (exams ≥ 20, glasses, contacts)
• Mental health (psychologist, registered counsellor)
• Physiotherapy, chiropractic, massage, naturopathy
• Travel medical insurance

2. Health Spending Account through a corporation

A Private Health Services Plan (PHSP) — commonly called an HSA — is the single best structure for incorporated owner-managers:

• 100% deductible by the CCPC (ITA s. 20.01)
• Tax-free receipt for the employee/owner (s. 6(1)(a)(i))
• Covers all CRA-eligible medical expenses per s. 118.2 (broader than most insured plans)
• No T4 income, no CPP, no EI

Conditions: the corporation must pay the owner a salary (T4) so they qualify as an employee; the plan must be in writing with a reasonable annual cap; and a third-party administrator should adjudicate claims (CRA scrutinises self-administered plans). Annual caps under s. 20.01: $1,500 single, $1,500 spouse, $750 per dependent — these are the deductibility caps for unincorporated owner-managers under the 2011 rules, but caps for incorporated owners are governed by the "reasonable" test, typically $5,000–$20,000.

3. Private health insurance premiums (unincorporated)

If you are a sole proprietor or partner without employees, premiums paid for a PHSP for yourself, your spouse and children are deductible on Line 9270 of T2125(not Line 33099), subject to the s. 20.01 caps above. With employees on the same plan, full deduction applies without the caps.

Employee-side premiums you pay personally for an employer's group plan also qualify as medical expenses on Line 33099 — but workplace plans where the employer pays the entire premium do not (no out-of-pocket amount).

4. Medical Expense Tax Credit (METC) — Line 33099/33199

Non-refundable credit at 15% federal (plus provincial) on eligible medical expenses exceeding the lesser of (a) 3% of net income or (b) an indexed floor ($2,759 for 2024). The 12-month claim period is flexible — pick any window ending in the tax year to maximise relief.

Tip: the lower-income spouse claims (smaller 3% threshold). Pool all family receipts onto one return.

5. Disability Tax Credit (DTC)

Worth ~$9,872 base + $5,760 supplement for under-18s in 2024 ($1,481/$864 in federal credit). Eligibility requires Form T2201 certified by a medical practitioner showing either a marked restriction in one basic activity of daily living orcumulative restrictions of equivalent severity, or 14+ hours/week of life- sustaining therapy. Approval can be retroactive up to 10 years (s. 152(4.2)).

6. Refundable Medical Expense Supplement

A separate refundable credit (Line 45200) for low-income working claimants with high medical costs. Maximum $1,471 (2024), reduced by 5% of family net income above $32,419, eliminated above ~$62,000. Easy to miss because it sits next to the larger METC.

7. Attendant care & nursing-home costs

Eligible under METC where the patient qualifies for the DTC. Choice of full nursing-home cost (forfeits DTC) OR attendant care up to $10,000/year + DTC — the latter is usually better. Care provided by a related person can qualify if structured as employment with T4 issuance.

8. Practical sequence

1. If incorporated: set up an HSA through a third-party administrator.
2. If unincorporated with no employees: deduct premiums on T2125 within s. 20.01 caps.
3. Pool family medical receipts onto the lower-income spouse, choose the 12-month period that maximises relief, and claim METC.
4. Confirm DTC eligibility for any chronic condition; backdate up to 10 years.
5. Check refundable medical expense supplement if family net income is below ~$62k.