--- title: "Medical Expense Tax Credit in Canada Explained" url: https://www.everstonecpa.com/blog/medical-expense-tax-credit-canada description: "How the medical expense tax credit works, which expenses qualify, and why an incorporated owner may prefer a private health services plan. Compare both." type: guide updated: 2026-10-04 summary: "The medical expense tax credit applies only to eligible expenses above a floor, calculated as the lesser of 3% of net income and an indexed dollar cap. For an incorporated owner, a private health services plan can convert the same spending into a corporate deduction instead." faq_count: 6 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Blog](https://www.everstonecpa.com/blog) Medical Expense Tax Credit in Canada Personal tax # The medical expense tax credit: *the threshold, what counts, and the alternative for owners* By EverStone CPA · Updated August 2026 · 7 min read **Quick answer:** The medical expense tax credit applies only to eligible expenses above a floor, calculated as the lesser of 3% of net income and an indexed dollar cap. For an incorporated owner, a private health services plan can convert the same spending into a corporate deduction instead. The credit is on what clears the floor — not on what you spent. **Rather have a CPA handle this?** A CPA at EverStone replies with a straight answer and a fixed fee for your situation. [Get My Fixed Quote →](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) ## Key takeaways - Only expenses above the floor generate a credit — the floor is the lesser of 3% of net income and an annually indexed cap ($2,834 for 2025). - Expenses can be claimed for any 12-month period ending in the tax year, not just the calendar year. - It is a non-refundable credit, not a deduction, so it reduces tax payable rather than income. - Claiming on the lower-income spouse’s return often produces a larger credit, because 3% of a smaller net income is a smaller floor. - A private health services plan lets a corporation deduct the cost outright instead, with no floor. ## Why most people get nothing How the medical expense floor is calculated The floor is the lesser of 3% of net income and the indexed cap ($2,834 for 2025). Only eligible expenses above it generate a credit. | Net income | 3% of net income | Floor that applies | | $60,000 | $1,800 | $1,800 — the 3% figure is lower | | $200,000 | $6,000 | $2,834 — the indexed cap is lower | The medical expense tax credit disappoints because of its floor. You get a credit only on eligible expenses above a threshold: the lesser of 3% of your net income or a fixed cap indexed each year. For the 2025 tax year that cap was $2,834. So the floor is 3% of net income for lower and middle incomes, and the cap for higher ones. At $60,000 of net income the floor is $1,800; at $200,000 it is the cap, since 3% exceeds it. The credit covers only spending above the floor. It is also a *non-refundable* credit. It reduces tax otherwise payable and cannot create a refund on its own. In a year with little or no tax payable, the credit is worth nothing at all. **Want a CPA to do your return?** Personal returns start at $125, and self-employed or rental returns are commonly $275–$500, quoted before we start. See [our personal tax service](https://www.everstonecpa.com/personal-taxes), or [get a personal tax quote](https://www.everstonecpa.com/book-online?service=personal#enquiry-form). [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) ## The two provisions people underuse Two features of the rules materially change the outcome and are routinely missed. **The 12-month window.** Claim expenses for any 12-month period ending in the tax year, if not claimed the year before. Choose an end date capturing two clusters of spending — say, dental work in November and the following September — to clear the floor once instead of missing it twice. **Pooling on one return.** Expenses for you, your spouse and children under 18 can be combined. The floor uses the claimant’s net income, so the lower-income spouse usually gets the larger credit — until their tax payable runs out. Other dependants are claimed separately, each with a floor based on their own income. Paying for family health costs out of pocket? If you own a corporation, there may be a better route than a personal credit. Worth ten minutes before your next big dental or vision bill. [Send an Enquiry →](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) [Personal tax services](https://www.everstonecpa.com/personal-taxes) ## What actually counts CRA publishes a searchable list of medical expenses, showing eligibility and documentation — some need a prescription, certification or Form T2201. Prescription medication, dental work, eyeglasses and contacts, hearing aids, most practitioner fees, ambulance service and some treatment travel qualify. Gym fees, non-prescription birth control and blood pressure monitors do not; blood coagulation monitors do. Two rules apply throughout. Claim only unreimbursed amounts, so insured costs come out. Amounts paid outside Canada are generally still claimable. Premiums you pay personally to a private health services plan are themselves an eligible expense. That benefit is modest, and it is where an incorporated owner should weigh the alternative. ## The PHSP alternative for incorporated owners A private health services plan — often a health spending account for a one-person corporation — changes the arithmetic. The corporation pays and deducts eligible health costs, and CRA does not tax the coverage as a benefit where the plan qualifies as a PHSP. There is no 3% floor and no non-refundable-credit limit. Spending becomes a corporate deduction instead of a personal credit at the lowest rate above a threshold. For recurring family costs, that is significant. The conditions matter. The plan must genuinely be a plan, with rules on coverage and operation. Having the corporation reimburse the owner’s dental bill without a qualifying plan risks a [taxable benefit assessment](https://www.everstonecpa.com/blog/taxable-vs-non-taxable-benefits-canada) instead of a deduction. Setup is covered in our guide to the [health spending account for small corporations](https://www.everstonecpa.com/blog/health-spending-account-canada-small-business). ## Which route to take If you are not incorporated, the credit is what you have; use the 12-month window and choose which spouse claims. Keep every receipt, even small ones: the floor is all-or-nothing, and the last few hundred dollars are the ones that count. If you are incorporated, compare before defaulting to the personal credit. The corporate route usually wins on recurring costs, and the credit still covers anything the plan does not. Large one-off costs and [how you pay yourself](https://www.everstonecpa.com/blog/rrsp-vs-dividends-business-owner-canada) interact, because the floor moves with your net income. Sources - [Canada Revenue Agency — Lines 33099 and 33199, Eligible medical expenses](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return.html) - [Canada Revenue Agency — Details of medical expenses](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return/details-medical-expenses.html) - [Canada Revenue Agency — Private health services plan premiums](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/benefits-allowances-chart/premiums-contributions.html) This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please [speak with a CPA](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) before acting on anything here. About this article **EverStone CPA** Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. [About the firm →](https://www.everstonecpa.com/about) · [Send an enquiry →](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) ### Keep reading [Health spending accounts →](https://www.everstonecpa.com/blog/health-spending-account-canada-small-business) [Taxable vs non-taxable benefits →](https://www.everstonecpa.com/blog/taxable-vs-non-taxable-benefits-canada) [Home office deduction →](https://www.everstonecpa.com/blog/home-office-deduction-corporation-canada) FAQ ## Frequently asked questions about medical Expense Tax Credit in Canada **How is the medical expense threshold calculated?** The floor is the lesser of 3% of net income and an indexed cap; for the 2025 tax year the cap was $2,834. Only expenses above the floor earn a credit, so lower incomes clear it sooner. **Can I choose which 12 months to claim?** Yes. Claim expenses paid in any 12-month period ending in the tax year, if not claimed the previous year. A well-chosen window can pull two clusters of spending into one claim. **Which spouse should claim the family’s medical expenses?** Usually the spouse with the lower net income, because the 3% floor is calculated on the claiming spouse’s income. The exception is where that spouse has little tax payable, since the credit is non-refundable and cannot create a refund on its own. **Are insurance premiums an eligible medical expense?** Premiums paid personally to a private health services plan are generally eligible. Amounts your employer or corporation paid on your behalf are not claimable by you, and any expense reimbursed by an insurer must be excluded from the claim. **What is a PHSP and why would an owner use one?** A private health services plan lets a corporation pay and deduct eligible health costs without the coverage becoming a taxable benefit, where the plan qualifies. With no 3% floor, it often beats the personal credit for recurring family health costs. **Do I need to send receipts to CRA?** Not with the return, but you must keep them. CRA routinely reviews medical expense claims and will ask for the supporting receipts, prescriptions or certifications. Some items on the eligibility list require a prescription or written certification before they can be claimed at all. ## Big medical costs this year? We’ll check whether the credit or a corporate health plan gives you the better outcome, and make sure the claim survives a CRA review. Send an enquiry. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=personal#enquiry-form)[Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) ## Have a question about this? Ask free through [the quick-question form](https://www.everstonecpa.com/quick-question); a CPA replies by email within one business day. A 45-minute **Advice Call** with a CPA is $225 plus GST, booked by email with a secure payment link and credited to your first invoice if you become a client within 60 days. Want us to take it on? [Send an enquiry](https://www.everstonecpa.com/book-online?service=personal#enquiry-form). [Ask a Free Question](https://www.everstonecpa.com/quick-question) [Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) Email info@everstonecpa.com ★★★★★ “Personal. Professional. Responsive. Plus he saved me a bundle!” Corrin Skalbeck · Google Local Guide **Run your own numbers with the free calculators:** [see which pay mix wins](https://www.everstonecpa.com/salary-vs-dividends-calculator) · [check when your T2 is due](https://www.everstonecpa.com/t2-deadline-calculator) · [Tax instalment calculator](https://www.everstonecpa.com/tax-instalment-calculator) [← The meals and entertainment deduction: why you only get to claim half](https://www.everstonecpa.com/blog/meals-entertainment-deduction-50-percent-rule-canada) [A month-end close checklist — and why it makes year end cheap →](https://www.everstonecpa.com/blog/month-end-close-checklist-small-business) --- Source: https://www.everstonecpa.com/blog/medical-expense-tax-credit-canada Prices: https://www.everstonecpa.com/pricing · Contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online