Medical expense tax credit — what qualifies and how to claim it
Medical expense credit
Section 118.2 provides a 15% non-refundable federal tax credit for eligible medical expenses exceeding the lesser of $2,759 (2026) and 3% of net income.
Plain-language explanation
Section 118.2 gives Canadians a tax credit for out-of-pocket medical expenses. The credit only applies to expenses above a threshold — CRA considers the first 3% of net income (or $2,759 in 2026, whichever is less) to be "normal" medical spending.
The threshold: You can only claim medical expenses exceeding the lesser of: - $2,759 (indexed annually), or - 3% of your net income
If your income is $60,000, 3% is $1,800 — use the lower number. Expenses above $1,800 are eligible for the 15% federal credit.
Eligible expenses (broad but specific): - Prescription drugs, over-the-counter drugs only if prescribed - Dental work, orthodontics, crowns, dentures - Vision care (glasses, contacts, corrective surgery such as LASIK) - Medical devices: wheelchairs, hearing aids, pacemakers, insulin pumps - Private health insurance premiums (for PHSP plans or individual policies) - Nursing home fees (if primarily medical) - Attendant care for a person with disabilities - Authorized service dogs - Fertility treatments (IVF, egg freezing) — confirmed by CRA in 2022
12-month period: Claims are based on any consecutive 12-month period ending in the tax year (not just January 1 to December 31). Choosing the best 12-month window can optimize the credit.
Example
Helen has net income $55,000. She paid $8,500 in dental and medical expenses this year. Threshold: 3% × $55,000 = $1,650. Eligible: $8,500 − $1,650 = $6,850. Federal credit: 15% × $6,850 = $1,028.
Amendment history
Significant changes to this provision. Older versions help you understand rules that applied in prior tax years.
Budget 2022 confirmed that costs related to fertility treatments, surrogate mother expenses, and egg freezing qualify as medical expenses under s.118.2(2)(a.4). This had been subject to CRA interpretation; the budget clarified and expanded eligibility.
Before
Fertility treatments were in a grey area; IVF and hormone treatments generally accepted but not all fertility costs
After
Broad IVF, egg/sperm storage, surrogacy-related medical costs explicitly eligible
Common questions
Can I claim over-the-counter drugs as a medical expense? +
Only if they are prescribed by a medical practitioner. CRA specifically requires a prescription even for drugs that are available without one (e.g., vitamins if prescribed for a medical condition). Without a prescription, OTC drugs are not eligible.
Can I claim my spouse's medical expenses? +
Yes. You can combine your eligible medical expenses with those of your spouse or common-law partner and claim them on one return. Claiming on the lower-income spouse's return is sometimes more advantageous because the 3% threshold is lower.
What is a Private Health Services Plan (PHSP) and are premiums deductible? +
A PHSP is a formal health benefits plan through an insurance company. Premiums paid for PHSP coverage are eligible medical expenses under s.118.2(2)(q). Self-employed individuals may alternatively deduct PHSP premiums as a business expense under the PHSP rules.
Key terms
Related sections
Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 118.2. — Read the official text on Justice Canada
These summaries are for educational purposes only and do not constitute legal or tax advice. Speak with a CPA for advice on your specific situation.