If you run your ecommerce business through a corporation and you are paying for dental work, prescriptions, glasses, or therapy out of your own pocket, there is a good chance you are handing the government money you did not need to. The fix has an ugly name, a Private Health Services Plan, but most providers just call it a Health Spending Account. It lets your corporation pay your family's medical bills as a fully deductible business expense, and you receive that benefit completely tax-free.
I bring it up because most of the sellers I talk to have never heard of it. So here is the plain version.
How it actually works
No premiums, no deductibles, and no insurance company deciding what is covered. You pay a medical bill, submit the receipt to the plan provider, the provider reimburses you out of your corporation's account, and the corporation deducts the full amount plus a small admin fee, usually five to ten percent. The reimbursement does not show up on your T4. That is the whole machine.
One Canadian warning, since you have probably read American advice
A Canadian Health Spending Account is nothing like the American one. In the US it is a personal savings account you contribute to. Here it is funded by your corporation, which pays the expense directly. No personal contributions, no investment account, no annual contribution cap in the American sense. If your mental model came from US content, reset it.
The mistake that can blow the whole thing up
This is the part worth getting right. A Health Spending Account is an employee benefit. So you have to actually be an employee of your corporation, which means paying yourself at least some salary and issuing a T4. Plenty of owners pay themselves only in dividends to skip CPP. That is a reasonable strategy on its own, but if you claim health benefits with zero salary, CRA can reclassify the entire thing as a taxable shareholder benefit. You lose the deduction, you pay personal tax on the medical expenses, and penalties can follow. If you are dividend-only today and you want one of these, the salary question is a conversation to have with your accountant before you start.
What it covers, and who it suits
The eligible list is broader than people expect: dental, vision and laser eye surgery, prescriptions, massage and physio and chiropractic, mental health visits, hearing aids, orthotics, even fertility treatment. Gym memberships, supplements, and purely cosmetic work are out.
It tends to make the most sense if you are incorporated, paying yourself some salary, and your family spends more than about fifteen hundred dollars a year on health. The higher your income, the more it beats claiming the medical expense credit on your personal return, because that credit has a threshold that quietly eats most small claims. Sole proprietors can do a version of this, but the rules are far more restrictive, which is one of the genuine arguments for incorporating.
One bit of small print
Quebec treats this differently and may tax the benefit provincially for owner-shareholders, so the math is a little less generous there. And you do want a proper provider with a real plan document rather than running it yourself, because a self-administered plan is an audit magnet.
We laid out the full guide, including real savings examples by province and income, the provider checklist, and the common mistakes, on our firm's site: Health Spending Accounts (PHSP) for Canadian Small Business Owners.
Not sure whether your salary and dividend mix supports one of these? That is exactly the kind of thing we model for sellers, and we share the plain-English version in the newsletter.