One of the perks of being an employee, in many cases, is that your employer will provide health insurance benefits.  Whether they pay for all of the premiums or only a portion, this can help to mitigate the costs significantly.  Although, Canadians do have the luxury of Medicare, this is often inadequate and as anyone who has ever waited in an emergency ward can attest,  may require you to take days off just to have your condition diagnosed (if one wants to look at this positively, it can be a great time to catch up on the classics).  While the discussion of our Medicare system is a discussion for another time and another blog, the point is that having health insurance of some variety can help make the process a lot less painful.  If you are self employed or a small business owner, however, the cost of health insurance can be prohibitive as you do not benefit from having a policy covering a group of people (thereby spreading the cost which is essentially how insurance companies work).  On a personal level, Revenue Canada does provide for a tax credit, but this is only beneficial if your costs exceed 3% of your taxable income (up to approximately $2,000).  Additionally the federal credit reduces your income taxes payable by 15% of the excess of medical expenses over the three year threshold.  Eg. if your taxable income is $50,000 and your medical expenses are $2,000, your net federal reduction to your taxes payable is$2000 –( $50,000X3%) = $500X 15% = $75.00.  This is very small relative to the actual expenses incurred.

So, how can a small business owner or self employed individual convert their medical expenses into business expenses?  The answer is to use what is known as a Private Health Insurance Plan or a PHSP.