WHAT CAN I TAX DEDUCT?
What Medical Expenses can I tax deduct?
All Canadian citizens have the right to apply for the Medical Tax Credit (MTC) on their personal tax returns. It applies to all medical expenses incurred but not reimbursed by any other plan. It is limited, has a large deductible and results in only a small tax deduction. Individual Health &Dental plan premiums are deductible to business owners only as are the 100% deductions available through the tax plans (PHSP). In all cases, the benefits paid for by the plans are tax free to the user.
Medical Tax Credit
Take your medical expenses, less 3% of your annual income (to a maximum of $2,208 for the 2015 year) and then multiply that remaining amount by 15%. This gives you the ‘Medical Tax Credit’ which is what you can use to reduce your current year’s personal taxes that you owe. It cannot be transferred to the next year.
Group Health & Dental Plans
Where there are enough employees to have a group employee plan, the premiums paid by the employer for the health & dental benefits are 100% deductible to the business. The life insurance and Long Term Disability (LTD) premiums should be paid by the employees. The premiums paid by the employee are not tax deductible to the employee. Where the employees are paying a portion of the health & dental premiums, those premiums are also not tax deductible to the employee.
Individual Health & Dental Plans
Employee purchase: the premiums are not tax deductible to the employee.
Self Employed: premiums are tax deductible to the business owner up to certain limits.
Business owner alternative: can purchase a PHSP, the costs of the plan are all 100% tax deductible against their business income. Sole Proprietors have a more limited amount of deductibility available to them whereas Corporate business owners could have up to $15,000 per employee annual tax deduction. Ask to have the rules and availability explained to you further.
Insured medical plans may also have a 'Cost Plus' benefit that works similarly to a PHSP if the insurance benefit is purchased.