Is Health Insurance a Taxable Benefit in Canada?

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.

What Are the Types of Health Insurance in Canada?

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:

  • Private Insurance, which is sponsored by an employer
  • Public Health Insurance from the government, a program that was started by the Canada Health Act
  • Personal Health Insurance plans that are sold by private insurance companies

Are These Health Insurance Plans Taxable?

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

Private Health Insurance – Employer Sponsored

It is tax-free for insured employees. To obtain this tax-free status, the company must set up the insurance through specific government guidelines.


Public Health Insurance – Government Sponsored

It is also technically tax-free, but this is where things get more complicated. Because public health insurance is federally funded by taxpayers, individual residents paying taxes play a role in the process.

Personal Health Insurance plans

Are the plans that are sold by private insurance companies and these are taxable.

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.

What Are Medical Benefits?

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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What Are Group Benefits?

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).

Extended Health Benefits in Canada

As an employer, adding an extension to your group health insurance can be a great choice. First and foremost, it provides your employees with the peace of mind that many of the medical care options that may be hard for them to afford otherwise would be covered.

Extended healthcare benefits are also unique in that they are relatively flexible, meaning that you can choose what services are best for you and your company. These can include prescription drugs, paramedical services (such as chiropractors, dietitians, or psychologists), medical supplies and services, vision coverage, hospital coverage, and out-of-province medical care, among other options.

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

Get in touch with our team to learn more about how extended healthcare benefits can serve you and your company.

What Is the Role of Tax-Free Health Spending Accounts?

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.

What Medical Expenses Can You Claim?

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.

Individual Health & Dental Plans

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