Tax Information

Premiums

The premiums for the benefits provided by a private health services plan, as defined by the Income Tax Act (Canada), may qualify as a business expense. A private health services plan is an insurance contract or plan that provides coverage for hospital and/or medical expenses.

We provide an annual statement of the Sonata Health premiums that may be tax-deductible as a business expense. The premiums related to the non-hospital/medical expense coverages are excluded from this statement.

Sole Proprietor or Partner

A sole proprietor or partner may be able to deduct premiums paid or payable to a private health services plan if the following conditions are met:

• Net income from self-employment (excluding losses and premiums for a private health services plan) for the current or previous year is more than 50% of total income, or
• Income from sources other than self-employment is $10,000 or less for the current or previous year
• The sole proprietor or partner is actively engaged in their business on a regular and continuous basis, and
• The premiums are paid or payable to insure the sole proprietor or partner, their spouse or common-law partner, or any member of their household

A sole proprietor or partner who does not have any employees

A sole proprietor or partner with no employees may deduct up to a maximum of:

• $1,500 for themselves
• $1,500 for each of their spouse or common-law partner and household members that are 18 years of age or older at the start of the period when they were insured, and
• $750 for each household member under the age of 18 at the start of the period

A sole proprietor or partner who has employees

A sole proprietor or partner may not be able to deduct any premiums for a private health services plan as a business expense if the employer does not offer coverage to the employees. Instead, the premiums may be claimed as a medical expense for purposes of the medical expense tax credit.

A sole proprietor or partner may be able to deduct premiums for a private health services plan for themselves, their spouse or common-law partner, or their household members based on the following criteria:

• The percentage of insurable employees who are full-time arm’s length employees
• The cost of the coverage provided to each employee that would be equivalent coverage for the sole proprietor or partner
• The percentage of the premium for each employee that is paid by the sole proprietor or partner
• The portion of the year that the sole proprietor or partner had employees

For more information, refer to Canada Revenue Agency’s “Business and Professional Income” guide available on Canada Revenue Agency’s website at www.cra-arc.gc.ca.

Incorporated business

An owner-operator of an incorporated business may be able to deduct premiums paid or payable to a private health services plan if the following conditions are met:

• The owner-operator works as an employee in the business
• The owner-operator offers similar coverage to the employees, and
• The benefits are reasonable in the circumstances, among other considerations.

If coverage is offered only to major shareholders of the corporation (i.e. only to the owner-managers) and not to other employees, the premiums paid may not be deductible from the company’s business income and may be considered a taxable benefit to the owner-managers.

For more information about the tax deductibility of your Sonata Health premiums, we strongly recommend that you consult with your financial security advisor about your particular circumstances. This information is intended as general information only, and is not intended to be legal or tax advice.