Understanding the Medical Expense Tax Credit (METC) in Canada – 2025 Update

Medical expenses can add up quickly, and many Canadians are unaware that the tax system offers relief through the Medical Expense Tax Credit (METC). This article explains how the METC works, what you can claim, and includes an updated sample calculation for 2025.

What is the METC?

The Medical Expense Tax Credit (METC) is a non-refundable tax credit that helps reduce the amount of income tax you owe. While it cannot create a refund on its own, it lowers your taxes payable if you’ve incurred eligible medical expenses.

Key Rules for Claiming the METC

• Eligibility: Only expenses that qualify under the Income Tax Act (as interpreted by the CRA’s list of eligible expenses) can be claimed. Examples include prescription drugs, medical devices, professional health services, and certain insurance premiums.
• Claim Period: You can claim medical expenses incurred within any 12-month period ending in the tax year, as long as they haven’t been claimed previously.
• Threshold (2025): You can only claim the amount of expenses that exceeds the lesser of:
  
  • 3% of your net income, or
  • $2,834 (federal fixed amount for 2025).
• Who you can claim for: Yourself, your spouse or common-law partner, your or your spouse’s children under 18, and certain dependent relatives.
• Out-of-country expenses: Eligible medical expenses paid outside Canada can still be claimed, provided they meet CRA criteria.
• Not reimbursed: Only expenses not reimbursed by insurance or another plan are eligible.
• Health Insurance Premiums: Premiums paid for a private health services plan (PHSP) - such as extended health and dental insurance - are eligible medical expenses.

Federal and Provincial Differences

The METC applies at both the federal and provincial levels, with slightly different thresholds and rates. Here we'll use Alberta as an example:

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(Note: Alberta lowered its lowest tax bracket rate from 10% to 8% in 2025, which directly reduced the provincial METC rate.)

Important: Each province and territory sets its own fixed threshold for the METC calculation. While the federal threshold is $2,834 in 2025, your provincial threshold will depend on where you live. For example, Alberta’s is $2,884, Manitoba’s is $1,728, Ontario’s is about $2,807, and other provinces/territories publish their own annually. Always confirm your province’s threshold when preparing your return.

How the METC is Calculated

1. Calculate 3% of your net income.
2. Compare this with the fixed threshold (federal: $2,834; Alberta: $2,884 in this example). Use the lesser amount.
3. Subtract this threshold from your eligible medical expenses.
4. Apply the federal credit rate (14.5%) and the provincial credit rate (8% in Alberta) separately, then add them together.

Example Calculation – Alberta Resident (2025)

• Net Income: $100,000
• Medical Expenses: $5,000

Federal portion

• 3% of income = $3,000 → compare with $2,834 → use $2,834.
• $5,000 − $2,834 = $2,166 eligible.
• Credit = $2,166 × 14.5% = $314.07.

Alberta portion

• 3% of income = $3,000 → compare with $2,884 → use $2,884.
• $5,000 − $2,884 = $2,116 eligible.
• Credit = $2,116 × 8% = $169.28.

Total METC (federal + Alberta) = $483.35.

Final Thoughts

The METC is a valuable tax credit for Canadians who incur significant medical costs. Each province and territory publishes its own threshold for the provincial portion of the credit, so be sure to confirm the figure that applies to you when preparing your return.

Keeping receipts, prescriptions, and documentation is essential - CRA may request them.

And remember: premiums you pay for health or dental insurance plans are also eligible medical expenses that can be claimed under the METC.

Take the Next Step

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