Are the Premiums Paid for Health Plans Tax Deductible?
Not unless you’re a business paying for a health plan for your employees. For individuals, the Canada Revenue Agency (CRA) has a has a whole list of health care expenses that are eligible for the Medical Expenses Tax Credit. This tax credit is non-refundable meaning it won’t be paid out if you already don’t pay taxes but can lower your health-related spending by up to 20%.
Common health expenses you can claim include dental visits, laser eye surgery, diapers, hearing aid, and even medical cannabis. It’s important to get to know this list so you can account for all your health spending and claim it. The list is quite large.
Are Health Benefit Plan Premiums Eligible for the Tax Credit?
Yes. Health benefit plan premiums that you pay to private health insurance companies are eligible for the Medical Expenses Tax Credit which is interesting because it allows for you to access this tax credit even if you’re healthy.
When you’re most healthy is the best time to institute a private health benefits plan because insurance companies exclude pre-existing health conditions and their associated treatments (including prescription drugs) on all their best plans. You can get unlimited prescription coverage on conditions that you don’t already have but you would be limited to $2,700 prescription drug coverage limits on anything pre-existing. Health benefit plans become far less attractive when you need to cover pre-existing health conditions because the insurance providers price in the assumption that entire limits will be used.
Plans are available for those who need to cover pre-existing conditions, but benefits limits are significantly lower, and prices are exceedingly higher.
This tax credit is only another incentive for you to plan for what is inevitable. Life is finite and the government wants your money. The best way to deal with these inevitabilities is through planning.
How Does the Medical Expense Tax Credit Work?
Add up all your eligible health expenses for the year then deduct it by the lower of either 3% of your net income or $2,352 (2019), then multiply the sum by 15% plus your lowest provincial marginal tax rate. This is how it’s calculated in the background but all you would have to provide is the sum total of your annual eligible health expenses. This would be claimed on lines 330 or 331 of your annual personal income tax return. Sounds complicated? Here is a calculator to add up how much this credit would represent for you.
Even if you haven’t started planning and you’re don’t currently have a spotless bill of health, it’s not too late. Often it will still make sense to purchase a medical plan knowing they will exclude coverage on a prescription you take because prescription drug costs vary widely. Standard blood pressure pills often cost under $20 every 3 months while some Cancer drugs cost over $4,000 per month and aren’t covered by provincial health insurance plans in any way. There’s still a wide gap of coverage by provincial health plans for those with diabetes and that condition can be debilitating financially.