How to Write Off Health Insurance Premiums When You’re Self-Employed in Canada (2025 Guide)

Running your own business gives you flexibility, independence, and control over your time, but it also means you are responsible for your own health coverage.

If you already have a private health insurance plan, you might be wondering: Can I write off the cost of my premiums?

The answer is yes, in many cases. Depending on how your business is structured, you may be able to claim your premiums as a business expense or through the Medical Expense Tax Credit (METC).

This guide explains how it works for both self-employed and incorporated Canadians, what the CRA considers eligible, and which approach may save you more in taxes.

Why This Matters for Self-Employed Canadians

For self-employed Canadians, health insurance serves two important purposes:

1. It protects you and your family from large, unexpected medical costs.
2. It can help reduce your taxable income when structured properly.

Whether you operate as a sole proprietor or run an incorporated business, understanding how to handle your premiums can make a real difference at tax time.

If you are still exploring coverage options, read our companion article, Best Health Insurance for Self-Employed Canadians in 2025.

Option 1: The Medical Expense Tax Credit (METC)

The Medical Expense Tax Credit is a non-refundable credit available to most Canadians. It allows you to claim eligible out-of-pocket medical expenses, including health and dental premiums you have paid yourself.

This credit will not create a refund on its own, but it can reduce the amount of income tax you owe.

How it works

You can claim the portion of your total eligible medical expenses that exceeds the lesser of:

• 3% of your net income, or
• A fixed annual threshold set by the CRA ($2,759 for the 2024 tax year, adjusted annually).

If your total medical expenses for the year are low, you might not cross this threshold, meaning you may not benefit much from the credit.

Eligible expenses

Generally, your private health and dental plan premiums can be claimed under the METC if the plan covers medical services that are not already paid for by your provincial health plan.

Common examples include:

• Prescription drugs
• Dental care (exams, fillings, cleanings)
• Vision care (eye exams, glasses, contacts)
• Mental health and therapy
• Paramedical services (physiotherapy, massage, chiropractic)
• Out-of-country emergency medical coverage

For a deeper explanation, see Aeva’s other resources:

• Claiming Your Health & Dental Insurance Premiums with the METC
• Understanding the METC in Canada (2025 Update)

Option 2: Deducting Health Insurance Premiums as a Business Expense

If you are self-employed or incorporated, there may be a more effective way to handle your premiums by deducting them through your business.

This approach bypasses the METC threshold entirely. Instead of claiming your premiums as a personal medical expense, you treat them as a business expense, which directly lowers your taxable business income.

Who qualifies

You can generally deduct health insurance premiums as a business expense if:

• You are self-employed (sole proprietor or partner in a partnership), or
• You are an incorporated business owner paying for coverage for yourself, your spouse, and dependents.

To qualify, your plan must meet the CRA’s definition of a Private Health Services Plan (PHSP), meaning at least 90% of the coverage is for eligible medical expenses.

How Incorporated Business Owners Can Use an HSA

For incorporated business owners, one of the most tax-efficient approaches is to use a Health Spending Account (HSA).

An HSA allows your corporation to reimburse you and your family for eligible health and dental expenses on a tax-free basis. The corporation deducts the cost as a business expense, and you receive the reimbursement tax-free personally.

HSAs are particularly useful when:

• You have medical expenses year to year
• You want flexibility over what is covered
• You want to supplement your existing health plan to cover out-of-pocket costs

Example Scenario 1: Incorporated Consultant in Calgary

Amira, 41, is an incorporated marketing consultant in Calgary.

She pays $2,400 per year for private health and dental insurance that covers herself and her partner.

Because Amira is incorporated, she sets up a Health Spending Account (HSA) through her corporation.

Here is how her setup works:

• Her health plan provides predictable coverage for routine care such as dental cleanings, prescriptions, and vision.
• Her HSA reimburses the remainder of eligible medical expenses, such as laser eye surgery and physiotherapy, 100% tax-free.
• Her corporation deducts both the insurance premiums and HSA reimbursements as business expenses.

Result: Amira’s company reduces its taxable income, while she enjoys tax-free reimbursements and a more efficient way to manage health costs.

Example Scenario 2: Sole Proprietor Graphic Designer in Ottawa

Evan, 36, operates as a sole proprietor, earning $85,000 per year from his freelance design business.

He pays $1,800 per year for health and dental coverage.

Evan’s options are:

• METC route: He can claim premiums under the Medical Expense Tax Credit, but only the amount above 3% of his net income (3% of $85,000 = $2,550). Since his premiums total $1,800, he would not qualify for a credit.
• Business deduction route: If his plan qualifies as a PHSP, he can deduct the full $1,800 as a business expense, lowering his taxable income to $83,200.

If Evan’s combined federal and provincial tax rate is about 30%, this saves him roughly $540 in taxes.

Result: The PHSP deduction gives Evan a clear advantage, even though his overall medical costs are modest.

Option 3: Combining a Traditional Health Plan with an HSA

For incorporated Canadians, one of the most efficient setups is to combine a standard health insurance plan with a Health Spending Account (HSA).

Your health plan provides predictable coverage for everyday needs, while your HSA covers any remaining eligible medical expenses, reimbursed 100% tax-free.

Both the insurance premiums and HSA reimbursements are typically treated as tax-deductible business expenses, helping you maximize protection and efficiency.

Pro Tip: If you are incorporated, this combination offers the best of both worlds: stable monthly costs and flexible tax-free reimbursements.

What Does Not Count as Health Insurance

The CRA only allows deductions or credits for medical-related expenses. The following types of coverage do not qualify under the METC or PHSP rules:

• Life insurance
• Disability insurance
• Critical illness insurance
• Travel insurance that does not include emergency medical coverage

Only plans focused on health and dental benefits are considered eligible.

How to Claim Health Insurance Premiums

Here is how to handle your claim depending on your situation:

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Keep all receipts and documentation from your insurance provider or HSA administrator in case the CRA requests verification.

Bottom Line

If you are self-employed in Canada, your health insurance premiums can do more than protect your health. They can also help lower your taxes.

• For sole proprietors, deducting premiums through a PHSP can often be more beneficial than claiming them through the METC.
• For incorporated business owners, pairing a traditional health plan with an HSA offers maximum flexibility, full tax-free reimbursement, and business deductibility.

Whichever route you choose, understanding the CRA’s rules helps you make the most of your coverage and your tax return.

Take the Next Step

Choosing the right health plan is the first step toward protecting both your health and your finances.

Compare Canada’s top private health insurance options for self-employed Canadians in minutes at Aeva.ca, where you can explore plans built for entrepreneurs and professionals.