Have you had a hard time getting care with Canada's public health plan? Consider getting private insurance. Now, you may wonder, is private medical insurance deductible?
In most cases, you can deduct the cost from your taxes. However, your plan needs to follow certain rules set by the Canada Revenue Agency. Read on to learn more.
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Public vs Private Medical Insurance in Canada
Canada's universal public health-care system provides basic care to citizens and permanent residents. While it can provide excellent basic care, it doesn't cover every expense you may need.
Because of this, some Canadians choose to get supplemental private insurance. The extra coverage can provide peace of mind if you or a family member gets sick, but it is a different system from the public one.
Public health insurance is available at no cost to residents and citizens. You can get a health insurance card that you can use whenever you need medical treatment.
However, private insurance can offer more coverage. You will need to pay a premium each month for the protection, but it can be useful if you or your relatives get sick or need surgery. Your private medical insurance is deductible as long as you have a qualifying plan.
How to Get Public Insurance
When considering health insurance in Canada, the public system is the easiest option for most people. You can apply for coverage, and your taxes will help cover your medical costs.
Because of that, you don't have to worry about a public medical insurance deductible. Once you apply for coverage, you will be able to take your insurance card to many clinics and hospitals.
While you can get free care where you live, you may need to pay for some services when travelling within Canada.
Fortunately, you can get emergency services without a health insurance card, so you don't have to worry about those instances even in other provinces and territories.
How to Get Private Insurance
If you determine that public insurance isn't enough, you can pay for private insurance. You can compare different health plans to find one that offers the coverage you need.
Consider if you need short-term or long-term coverage or other features. You can get dental coverage and vision care as well. However, the more services you require, the higher the premiums you will pay.
Still, a higher premium can be worth it for excellent care. When choosing a plan, you can also ask if the medical insurance is deductible from your taxes.
In some cases, higher insurance costs may be worth it if you can deduct them from your income. Then, you can save money in other areas.
When Medical Insurance Is Tax Deductible
In Canada, you can deduct some health expenses with the Medical Expense Tax Credit. You can claim these deductions on your tax return for individual items, but you may also be able to deduct your insurance costs.
To deduct your insurance premiums, you'll need to have a private insurance plan that qualifies. You can ask your current insurer about these things. If you want to get private insurance, you can ask before you settle on a plan.
Then, you can choose a private insurance plan that qualifies for the Medical Expense Tax Credit.
Must Be an Insurance Plan
If you find private health coverage through an organization other than an insurance company, the plan won't qualify for a deduction. The Canada Revenue Agency (CRA) lets you deduct the cost of qualifying medical, hospitalization, and dental plans.
You can compare multiple private insurance providers to choose a plan that qualifies. That way, you can lower your tax burden when you file your taxes.
However, avoid health sharing organizations or health ministries. Because those groups aren't insurance plans, the CRA won't let you deduct your medical costs.
Substantially Covers Eligible Expenses
Even if you have a medical insurance plan, the CRA may still not let you deduct it on your taxes. The plan must only cover eligible expenses, or 90% of the costs it does cover must be eligible expenses.
Your plan can cover expenses that you can't deduct individually on your taxes. However, if expenses such as blood pressure monitors or liposuction are more than 10% of your private insurance benefits, it won't qualify for a tax deduction.
Always review what your insurance covers before filing your taxes. You can also ask your insurance provider about their coverage options to make sure that the plan meets the CRA's requirements.
Other Eligible Medical Expenses
When determining if your insurance plan qualifies for a tax deduction, you should think about what it covers. You can deduct the premium as long as most of the coverage is of expenses such as:
- Ambulance service
- Cancer treatment
- Crutches
- Dental services
- Hearing aids
- Hospital services
- Insulin
The CRA has a comprehensive list of eligible and non-eligible medical expenses. You can use the list to determine if you can deduct the cost of the specific item or your health insurance premium.
Ineligible Medical Expenses
While you can deduct many medical expenses from your taxes, you can't deduct everything. Many elective procedures, such as filler injections and teeth whitening aren't eligible expenses for tax deductions.
If these things make up more than 10% of what your insurance covers, you also won't be able to deduct those premiums. You also can't deduct money you spend on organic food, vitamins, supplements, or athletic club or gym fees.
In 2022, you also can't deduct expenses that you claimed in 2021. While you can deduct costs from any 12-month period that ended in 2021, consider if you claimed it last year.
Who Can You Claim Deductions For?
When you file your taxes, medical insurance is deductible for you, your spouse or common-law partner, and any dependents. You can claim the deduction for qualifying dependants, and they don't have to be under 18.
However, if your adult dependents paid for their own private medical insurance, then they can claim themselves. You can only claim the deductions for people on your policy.
How to Claim Medical Expenses on Your Taxes
Once you determine that your medical insurance is deductible, you can claim it on your taxes. You can fill out the information as you would with the rest of your taxes.
To make it easier on yourself, you can keep receipts and documents throughout the year. That way, you can add up the total cost more easily. However, you can organize everything as you do your taxes.
Add Up Your Expenses
When you get to line 33099, you will need to add up all of your qualifying medical expenses. You can do this for yourself and your spouse or common-law partner. If you have dependents under age 18, you can also add their expenses here.
You'll find this line in Step 5 - Federal Tax. Make sure you only include the amount that you paid for eligible expenses in the prior year.
Subtract an Amount
Next, you will use the line below to subtract one of two amounts from your original total. If your total net income is high enough, you will subtract $2,397. However, if 3% of your net income is lower than that you will subtract that 3% from your total.
You can find your net income on line 23600 of your tax return. Then, you can calculate 3% of that with a calculator to see which number you need to use.
Claim the Credit
If you live in a province or territory outside of Quebec, you can use line 58680 on Form 428 to claim the credit for your province or territory. Quebec residents will need to visit Revenu Quebec to figure out how they can claim the tax credit.
Either way, you can receive the tax credit for both your federal and provincial taxes. Then, you can save even more money at the end of the year.
When You Have Adult Dependents
If you have dependents who turned 18 before the end of last year, you will need to calculate their expenses on line 33199. You can follow the same basics steps as before, but you have to calculate the costs for individual dependents separately.
You'll subtract either $2,397 or 3% of your net income, whichever is less. Then, you can claim the tax credit on line 58729 of your provincial or territorial form. Quebec residents will need to contact Revenu Canada for more information.
Documents You Need
When claiming the Medical Expense Tax Credit, you will need to support the numbers on your tax return. You don't need to send the documents with your return, but you should have them on file in case the CRA needs them.
Make sure you have a safe place, such as a folder or filing cabinet, for your medical expense documents. That way, you can find them if you need to show them to the CRA.
Even if you don't need them, it can help to keep track of the following documents.
Prescription
If you're claiming prescription expenses, you will need proof that a doctor gave you a prescription. Not all expenses will need this, but some do.
When you get a prescription from your doctor, make a copy of it for your records. While you may not need the copy later, it's better to be safe than sorry. You can always shred the prescription if you no longer need it.
Receipt
From medical insurance to specific expenses, keep every receipt you get for a qualifying expense. Your receipt should show who you paid for the insurance or other expense, and it should show the amount.
Not only can that help the CRA if they need your receipts, but it can also help you when filing your taxes. You can use the numbers to add up your total more easily.
Form T2201
If you or a family member has a disability, you may also need Form T2201, which is the Disability Tax Credit Certificate. The CRA may ask for this form to approve certain claims for disability-related devices.
You can get this form when you claim the Disability Tax Credit, and you can use it for medical expenses. Keep a copy of this form for as long as you use the device or devices that it claims you need.
Certification
Even if you don't have a disability, you may still need some certification from a doctor that helps the CRA approve your claim. You can have a doctor or another medical practitioner write the certification, depending on what it's for.
For example, an eye doctor can certify vision-related expenses. An occupational therapist may sign off on expenses related to those appointments.
How to Claim the Refundable Medical Expense Supplement
In addition to the Medical Expense Tax Credit, you can claim other expenses on your taxes. If you're low-income, you can claim the refundable medical expense supplement as a working individual.
You can get this refund if you have high medical expenses and if you were a Canadian resident the whole year. If you meet all of the qualifications, you can claim up to $1,272.
You'll need to fill out line 45200 of your return to claim this refund. If you want to claim this amount, make sure you review your taxes so that you can claim the highest refund available.
How to Claim the Disability Support Deduction
Whether or not your medical insurance is deductible, you may also qualify for the disability support deduction. You can find the deduction on line 21500, and you can use it to deduct some of your disability-related expenses.
When making this claim, you can include the disability expenses on line 33099 with your other costs. Or you can use line 21500 for these expenses.
You can also split the total between these two lines. If you want to maximize the deduction, consider working with an accountant. That way, they can help you decide which option is best.
Is Medical Insurance Tax Deductible?
When looking for more health coverage in Canada, you may wonder, is medical insurance deductible? You can deduct the cost of your premiums from a qualifying plan.
However, the CRA has strict requirements, so make sure your insurance coverage qualifies. That way, you can obtain the tax deductions and credits you deserve.
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