Paying for health insurance out of pocket? You might be able to get some relief at tax time. In Canada, some health insurance premiums are tax deductible. But not all.
The catch? You can only claim the portion of your total medical costs that go over a certain threshold. If your medical expenses are relatively low for the year, this credit might not help much.
That’s where self-employed people get a potential edge. If you're a sole proprietor or in a partnership, you may be able to deduct your health insurance premiums as a business expense instead. That lowers your taxable income directly, which could lead to bigger tax savings overall. This route skips the minimum threshold rule and applies no matter how much you spent on other medical expenses. The CRA does have limits and eligibility rules for this deduction, so it's worth reading the fine print!
We’ll get into more detail below, but here’s a quick overview of who’s eligible to claim health insurance and medical expenses in Canada and what the best recourse might be.
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Employed (with or without benefits)
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Yes
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No
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Self-employed (not incorporated)
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Yes (claiming a business expense may be better)
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Yes
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Self-employed with low income
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Yes (if over threshold)
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Yes (with limits)
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The smarter way to cover your health expenses.
What counts as “health insurance”?
In this context, we’re talking about private health insurance. That includes any health or dental plans you’ve bought yourself or receive through work that cover medical costs not included in your provincial health care plan. Think things like:
- Prescription medication
- Dentist visits
- Glasses and contact lenses
- Paramedical services like physiotherapy, chiropractor, or psychologist appointments
These are the types of expenses that can fall under the “medical expense” umbrella with the Canada Revenue Agency (CRA). If your plan mixes eligible and non-eligible services, you may need to break it down or ask your insurer to clarify what portion of your premiums are eligible.
What doesn’t count: Life insurance, disability insurance, critical illness insurance, and travel insurance that doesn’t include emergency health care. These types of insurance are either treated differently by the CRA or aren’t considered “medical” in nature.
Can I get tax deductions on my health insurance premiums?
Yes, but only under certain conditions. In most cases, Canadians can claim their private health insurance premiums under the Medical Expense Tax Credit (METC).
This is a non-refundable tax credit. It won’t trigger a refund on its own, but it can lower how much tax you owe, especially if your medical expenses are high compared to your income.
To claim it, your total medical expenses for the year must be more than the lesser of 3% of your net income or $2,635 (for the 2023 tax year; this amount gets updated yearly).
If your medical costs are low, this credit might not help much. But if you’ve had a year with big expenses—like getting braces, fertility treatments, or ongoing therapy—it can make a real dent in your tax bill.
Also important: if your employer pays for part of your premium, you can only claim the part you paid yourself. Not the total premium.
What if I’m self-employed?
If you’re self-employed, you may have access to a bigger tax break than the average employee.
Instead of claiming your health insurance premiums as a personal medical expense (which gives you a tax credit), you may be able to deduct them as a business expense. That means the cost comes off your total income before tax is calculated—so your taxable income is lower, and your tax savings could be higher.
To qualify:
- You must be self-employed as a sole proprietor or part of a partnership (not incorporated).
- The plan must be for you, your spouse or common-law partner, or your children under 18.
- You must be actively earning business income.
- Be paying for a plan that’s reasonable in cost and comparable to what an employee might get in a similar job
What’s considered a “reasonable” cost for health insurance?
The CRA expects that the insurance plan you’re deducting doesn't have an excessive cost. For example, if you're a freelance graphic designer and you’re paying $5,000/year for extended health coverage, the CRA might flag that. But if your plan is similar in scope and price to what an employee at a small agency might get, you're likely in the clear.
Example scenario: Self-employed deducting health insurance
Let’s say you’re a freelance web designer in Toronto.
- You’re a sole proprietor, not incorporated.
- You earn $80,000 in net self-employed income for the year.
- You pay $2,000/year for a private health insurance plan that covers you, your spouse, and one child.
- The plan includes dental, vision, prescriptions, and some paramedical services.
Option A: Claiming it as a personal medical expense
You’d use the Medical Expense Tax Credit. But that only applies to amounts over 3% of your income or $2,635 (whichever is less). 3% of $80,000 = $2,400.
Since your premiums are $2,000, you wouldn’t get anything back. You’re below the threshold.
Option B: Deducting it as a business expense
You deduct your premiums under your business income instead. That $2,000 comes off your taxable income. So instead of paying tax on $80,000, you're taxed on $78,000.
If you’re in a 30% combined federal/provincial tax bracket, that deduction could save you: $2,000 x 30% = $600 in tax savings.
And since this is a deduction, it applies even if your medical expenses are relatively low. When you deduct health insurance premiums as a business expense (as a self-employed person), you get the tax break no matter how much or how little you spent on medical expenses that year.
No workplace, no problem. Get the coverage they take for granted.
How do I claim my health insurance & medical expenses?
For most individuals, you’ll claim health insurance premiums under Line 33099 or 33199 on your personal income tax return.
- Line 33099: for yourself, your partner, and your children under 18
- Line 33199: for other dependants (like parents or grandparents)
Keep your receipts and statements from your insurance provider. You may need to submit them if the CRA asks.
If you’re self-employed, you’ll report eligible premiums as part of your business expenses in the self-employment section of your return.
To double-check if a specific expense is eligible, use the CRA’s searchable list of medical expenses: Eligible medical expenses from the CRA.
Bottom line: Health insurance can be tax deductible
In Canada, private health insurance premiums can be tax deductible, either through a credit or a deduction. But eligibility depends on what the plan covers, who paid the premiums, and your tax situation.
If you’re self-employed, the tax advantages may be even bigger. Just be sure to follow the CRA’s guidelines and keep documentation in case you’re audited.
If your situation is complex—or if you’re not sure what qualifies—it’s worth running things by a tax professional.
