Insights & advice
Are your health insurance premiums tax deductible?
February 2022 - 15 min read
Key takeaways
Explanation of health insurance premiums
Some types of health insurance premiums are tax deductible
-
An intro to premiums
Health insurance premiums – a line item added to the budget, but rarely considered for its possible financial benefits. It’s important to know that not all premiums are in fact, created equal. In fact, you could be eligible for a tax break depending on what kind of premiums you pay.
| Type | Definition | Tax deductible? |
|---|---|---|
|
Employer paid premiums | Workplace benefits provided by your employer. This benefit is included in your total compensation and paid by the employer. |
|
Jane works for Canada Life and receives health and dental benefits as part of her total compensation. Because Jane doesn’t pay for her benefits directly, she cannot claim the premiums on her annual income tax filing. However, Canada Life can claim its employees’ premiums and they become tax deductible.
| Type | Definition | Tax deductible? |
|---|---|---|
| Employee paid premiums | Health insurance benefits purchased and paid for by the employee. This could be because their employer doesn’t provide such benefits or that person has additional insurance on top of what is included in their workplace benefits (part of compensation). |
|
Jimmy works for Acme company which doesn’t provide benefits as part of their employees’ total compensation. Jimmy has a few prescriptions he needs filled regularly and thinks it’s best to have health insurance coverage. Jimmy purchases a health plan from Canada Life, for which he pays a monthly premium. Because Jimmy pays for his health coverage himself, he is eligible to claim his premiums on his annual income filing.
| Type | Definition | Tax deductible? |
|---|---|---|
| Freelancers/gig workers | Health insurance benefits paid by you, the freelancer/gig worker |
|
Johnny works part time at a diner to support his dream to be a fulltime magician. He gets hired for lots of corporate events, parties, and private parties and celebrations. Because the diner doesn’t provide health benefits to its employees, and his magician gigs are individual contracts, he purchased a health insurance plan from Canada Life. Because Johnny pays a monthly premium for his health coverage, he can claim those payments on his annual income tax filing.
| Type | Definition | Tax deductible? |
|---|---|---|
| Private health insurance premiums |
Health insurance coverage provided by a third party. This is usually coverage purchased through an advisor and is separate from what your workplace benefits cover. |
|
Gina works at Canada Life, receiving the same workplace benefits as Jane - as part of her total compensation. Gina has 2 kids who need braces and another kid who has some physiotherapy needs. Because Gina can see the amount of health and dental coverage her family needs, she purchases additional coverage through her advisor from a private company. Because Gina pays a monthly premium for her private coverage, she can claim those payments on her annual income tax filing.
| Type | Definition | Tax deductible? |
|---|---|---|
| Self-employed health insurance premiums |
As someone who is self-employed and the sole proprietor of their business, your premiums may be deducted from your business, provided your business is your primary income source. |
|
Betty is a fulltime graphic designer who works for herself. She takes on multiple contracts at once and was able to make the leap to fulltime self-employment a few years ago. Because she doesn’t have a workplace in the traditional sense and is her own employer, Betty decided to work with her financial advisor to purchase health and dental coverage from Canada Life for herself. Betty pays the insurance premiums through her business, and therefore can claim those payments on her annual income tax filing.
| Type | Definition | Tax deductible? |
|---|---|---|
| Business owner | A small -medium sized business owner who pays life insurance premiums on behalf of their employees. |
|
Brooke is a speech pathologist who opened her own practice last year. Business has been booming, so she decides she needs to hire an assistant. She also wants to provide her employee (and hopefully future employees) health and dental benefits, so she purchases a plan from Canada Life. Because Brooke, the business owner, pays for the plan on behalf of her employee, she can deduct the cost as a business expense and claim the premiums on her annual income tax filing.
What’s next?
The kind of tax deduction you could receive will depend on the coverage you have.
To see what kind of coverage could best suit your needs, get a quote online.
Contact us to learn how our benefits and savings solutions can help your small business
The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.
