A Private Health Services Plan allows you to expense your medical and dentals costs (for you and your employees) through your company.
In 1988 CRA (Canada Revenue Agency) stated that if your medical and dental benefits are administered through a third party arms-length administrator, they can be 100% tax deductible to your company. These benefits are also not a taxable benefit to you or your employees.
PHSP for the incorporated business owner
If you are incorporated, you may have different benefit levels for each class of employee as long as the benefit amount does not exceed 20% of the employee’s gross income.
PHSP for the self-employed (unincorporated)
Self-employed with no employees
If you are a sole proprietor you are allowed to deduct specific amounts from your income depending on the number of dependents you have. Your deduction limits are as follows:
$1,500 for yourself
$1,500 for your spouse
$750 for each child in your household under age 18
$1,500 for each child in your household who is over 18 years of age and still attending school
Example
A family of four with two children under 18 would be allowed a total $4,500 per year comprised of $1,500 for each of the parents and $750 for each of the children.
Self employed business (or unincorporated business) with arms length employees
If you have arms length employees (unrelated to you) on a full time basis your family deduction will be determined based on the coverage you provide to your employees. In other words, the amount that you can deduct must be equal to what your arms length employees are able to deduct.
Example
If you determine a dollar amount like $2,500 per year for your employee's family, then your family is also allowed the same amount per year.