PHSP vs Medical Expense Tax Credit (METC)
The METC is tax relief provided by CRA that applies to individuals who have sustained medical expenses for themselves or certain of their dependants. For 2005, the credit equals 15 per cent of qualifying medical expenses in excess of the lesser of $1,885 or 3 per cent of net income.
Example
Net Income $40,000 with qualifying expenses of $2100.
1200 (3%) versus 1,885
2100 - 1200 = 900
0.15 x 900 = METC of $135.
$135 is your federal tax credit. The lowest provincial marginal tax rate is added to this credit. In Alberta for example, this is 10% of $900. Your total combined tax credit would be $225. This means your tax payable is reduced by $225.
Your gross savings with a PHSP would be over $600 if you live in Alberta. If you live in another province, please input your personal numbers into the tax calculator to determine your PHSP savings.