Is Health Insurance a Taxable Benefit in Canada?

In 2017, per capita, healthcare spending in Canada came in at around $4,500, and the average life expectancy was 81.7 years that same year.

Because there is no designated “healthcare tax,” it is hard to know exactly how much of our taxpayer money goes into healthcare services that are free at the time of use. What we do know is that a substantial portion of our tax dollars goes into funding our single-payer system.

That brings us to a common question—is health insurance a taxable benefit in Canada? The short answer is that it depends on the situation.

Whether your health benefits may be taxed is based upon what kind of health insurance you have.

There are three main types of health insurance in Canada:

Each type of health insurance is handled differently in regard to taxes as follows:

Regardless of insurance, many specific healthcare treatments can only be paid for out of pocket. Within those expenses, some are tax-deductible and can later be written off, and some are not tax-deductible.

Typically, your medical benefits are a sum of money from your health insurance to pay for healthcare. When it comes to company health insurance, employers provide medical benefits to employees. In this situation, medical benefits will not be taxed.

Medical benefits vary by health insurance plan. Although all policies include what is generally deemed basic medical care, some also include dental care, vision care, and other related services.

Public health insurance in Canada generally includes access to doctor visits, hospital visits, and emergency care. Any services that aren’t covered require some form of supplemental insurance—and some, but not all, of those options are also tax-free.

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By definition, group benefits are benefits offered via a group insurance policy, a plan that only covers a specific group. Employers typically offer them.

In most of Canada, the majority of group benefits are not taxable for employees. The group benefits that employers can choose to provide to employees come in many forms.

For example, some employers may not provide basic healthcare insurance services since they can already be accessed with public healthcare. However, they do purchase extended health care benefits or offer an option for a Health Spending Account (HSA).

Acquiring group extended health benefits creates a tax-saving measure for employees while also improving quality of life.

Tax-free health spending accounts are another option for employers. An HSA is a program that can provide employers with untaxed funds with which they can compensate employees for certain medical services.

HSAs stand out because they do not require an employer to pay a premium. They function more like expense accounts than an insurance plan.

You, as an employer, would set up a financial limit for healthcare spending in the context of your company, and as long as employees quickly and correctly claim relevant healthcare expenses, you can use this fund to compensate them for the amount they spent.

You can claim many healthcare expenses on your taxes in Canada.  In some cases, doing so doesn’t even require any specific paperwork on your part, and in other situations, you may need to file Form T2201 or utilize a Disability Tax Certificate.

Some common medical expenses that people do not always know are eligible for a tax deduction include assisted breathing devices, hearing aids, medical cannabis, and service animals.