Using a Private Health Service Plan (PHSP)

A Private Health Service Plan, also referred to as a PHSP or Cost Plus Plan, is a legal plan within CRA’s guidelines whereby a company can legally deduct medical, dental and vision expenses. For some people with larger medical or dental bills this turns out to be a substantial savings. Typically a person who is the owner or shareholder of their company must take out money from their business to pay for these expenses, thus they are typically taxed on that money personally and they don’t get any tax deductions. You may be asking, “Well, don’t I get a tax credit for medical expenses?” You may receive a small tax credit for medical expenses, but it is only a small percentage of what you can save with a PHSP. For example let’s say you have a Corporation and you, as an employee, want a $2,500 laser eye surgery. With a PHSP the after tax cost is $2,375, derived from the 2,500 cost plus a 10% admin fee less corporate tax savings (14% in Alberta) However, the after tax cost to you as an individual could be close to $4,100, derived from the $2,500 cost plus the taxes paid on the money you took out of your corporation to pay for the eye surgery. The more the medical, dental and vision expenses…the more the savings!