Many individuals have huge medical costs which they cannot deduct to certain limits personally as both spouses’ taxable income are high.
You can use “Private Health Service Plan” (PHSP) to make your medical expenses fully deductible. If you have an incorporated business or a partnership you qualify. You could be a single one-person business or have numerous employees.
Let’s take an example:
If a self employed person has income of $30,000, he can only claim medical expenses incurred over 3% of his income which is $900 (30,000 @3%). Therefore, if his medical expenses are $1,000, he can claim only $100 for which he will receive non refundable tax credit @lowest tax rate of $20.50
However, CRA allows small businesses to setup independent PHSP to claim medical expenses incurred by employees and their dependents. These are cost plus plans as well as annual fixed price plan.
They charge initial enrollment fees and admin fees of 8% of claim amount.
Let’s take above example assuming individual had costplus plan:
An individual will claim $1,000 by submitting appropriate documents to PHSC to get reimbursement. PHSC will reimburse medical expenses incurred to an individual which is tax free. PHSC will add 8% admin fees and charge full amount to his company $1,080.
$1,080 is fully deductible for individual business and at minimum tax rate there will be a saving of $221.40. Net saving is $141.40 (221.40 less $80 admin fees). An individual is saving $120.90 (141.4-20.50) at lowest tax bracket by claiming medical expenses from business than personally. If the person is in higher tax bracket, he will save more.
Below is the link to couple of companies providing this services. Let us know if you have any questions:
https://www.olympiabenefits.com
http://www.bizflex.ca/index5.html
Canada Revenue Agency:
IT339R2 Meaning of “private health services plan”
S2-F1-C1 : Health and Welfare Trusts
Eligible medical expenses