HSA Eligible Medical Expenses: What Canadian Business Owners Need to Know

Introduction

So you want to know what you can actually claim with your Health Spending Account (HSA). The first thing to understand is that "HSA" is not the official tax terminology. Instead, HSA is the market name for a type of Private Health Spending Plan (PHSP) in which the employer reimburses their employees for eligible medical expenses up to a predetermined limit.

So what exactly is a PHSP? While paragraph 248(1) of the Income Tax Act defines a PHSP in broad terms, Interpretation Bulletin IT-339R2 provides much-needed clarity. According to the bulletin, coverage under a PHSP (or "HSA") must qualify as a medical expense under paragraph 118.2(2) — the same provision that outlines eligible expenses for the Medical Expense Tax Credit (METC). In practical terms, this means an HSA's eligibility criteria are directly tied to those of the METC: if an expense qualifies for the METC, it qualifies for an HSA.

Now that the legal foundation is established, let's dig into what is actually covered. If you don't want the details, see the full list of CRA-eligible medical expenses. Below, we will cover some of the more important concepts.

Medical Services

Section 118.2(2)(a) of the Income Tax Act states that an HSA covers any medical or dental expenses paid to a:

• medical practitioner, dentist or nurse
• a hospital (public or licensed private hospital)

These expenses include all diagnostic, therapeutic, and rehabilitative care performed by a qualified practitioner (acting within their professional training), as well as the completion of health and disability forms ancillary to the provision of medical services. This means that anything involving the assessment, treatment, or recovery of a medical condition can fall under this category, as long as it is delivered by a qualified provider — with a couple of notable caveats.

First, the medical practitioner must be recognized by the CRA in your specific province. For example, while massage therapists are recognized by the CRA in British Columbia, they are not recognized in Alberta. Before your appointment, make sure the medical practitioner is considered an authorized medical practitioner by checking the CRA's list of authorized medical practitioners.

Second, this does not include amounts paid for medical or dental services purely for cosmetic purposes. Sorry, your Brazilian Butt Lift isn't covered. The only exception is if the procedure is necessary for medical or reconstructive purposes.

Prescription Medication

Prescription medications are governed by paragraph 118.2(2)(n) of the Income Tax Act. Under this rule, drugs, medicaments, and related substances are eligible only if they are:

• intended for the diagnosis, treatment, prevention, or correction of a disease, disorder, or abnormal physical condition;
• can only be obtained by prescription (over-the-counter drugs are not eligible); and
• recorded by a pharmacist at the time of purchase.

This definition ensures that eligible medications are part of a formal medical treatment process rather than general wellness or over-the-counter health products. The involvement of both a prescribing practitioner and a dispensing pharmacist creates a controlled chain of medical oversight. The most important principle to note is that if the medication can be obtained over the counter, it is not eligible — even if recommended or prescribed by a medical practitioner.

Medical Devices

While services from authorized practitioners have a broad scope, the scope of medical devices is more limited. Only those medical devices explicitly listed in either paragraph 118.2(2) of the Income Tax Act or paragraph 5700 of the Income Tax Regulations are eligible claims for an HSA.

Those medical devices listed in paragraph 5700 of the Income Tax Regulations must also meet the following conditions:

• They must be prescribed by a medical practitioner; and
• they meet the conditions prescribed by the Regulations (usually maximum limits).

The list and specific conditions are extensive. To make this simpler, Frontier HSA has created a searchable list of eligible medical expenses, including medical devices.

Other Services

While the above covers the majority of what the average person will claim with an HSA, there are other expenses listed in paragraph 118.2(2). Some of these include:

• Full-time attendant care (in-home or nursing home)
• Group Home care (for individuals with severe and prolonged impairments)
• Ambulance services
• Medical travel expenses (with conditions)
• Specialized care for persons with disabilities
• Rehabilitation therapy services (including occupational, speech, and physical therapy)
• Mobility aids
• Hearing aids and other devices for persons with hearing impairments
• Reading services for blind or learning-disabled individuals
• Training services for caregivers supporting a person with a disability
• Tutoring services for individuals with learning disabilities or mental impairments
• Fertility clinic services related to assisted conception
• Donor bank services (sperm, ova, embryo acquisition fees)
• Surrogacy-related medical and assisted reproduction services (eligible reimbursable expenses under assisted human reproduction rules)

The full list can be found on our CRA Eligible Medical Expenses page.

Key Takeaways

As you can see, the list of eligible expenses is extensive and includes many services that aren't covered by traditional insurance. It's important to review the list of authorized medical practitioners in your province and the list of other eligible expenses prior to making your claim. The good news is that Frontier HSA has made this easy — the full searchable list can be found on our website.

If you want more information about eligible medical expenses, we recommend reading the CRA guide RC4065 Medical Expenses - 2025 or contacting us directly at hello@frontierhsa.ca.

FAQ

Do HSA and METC use the same practitioner rules?

Yes, as stated above, Interpretation Bulletin IT-339R2 clarified that coverage provided under a PHSP (or "HSA") must qualify as a medical expense under paragraph 118.2(2), which defines what is eligible for the Medical Expense Tax Credit (METC). This means that an HSA and the METC have the same rules for eligibility, including what qualifies as an authorized medical practitioner.

Can I claim expenses through both an HSA and the METC?

No. You may only claim medical expenses under one section of the Income Tax Act. The METC route is threshold-limited: you only get tax relief on the amount above the lesser of 3% of net income or $2,834 for 2025 returns. An HSA is not subject to this threshold, making all your medical expenses tax deductible.

Do I need to keep my receipts?

Yes. If you are audited, the CRA may ask for original receipts, proof of payment, and confirmation that your provider was an authorized practitioner. It is vital to retain all supporting documentation for at least six years following the relevant tax year.