Medical Expense Tax Credit (METC) vs HSA: Which Saves More?

If you own a corporation, an HSA usually saves more than the METC. Here is the plain-English version.

Benji VisserBenji Visser·March 23, 2026·Updated April 11, 2026·7 min read

If you own a corporation in Canada, an HSA will usually save you more than the Medical Expense Tax Credit (METC).

The simple reason is this:

  • The METC gives you a partial tax credit later, when you file your personal tax return
  • An HSA usually lets your corporation pay eligible medical expenses with pre-tax corporate dollars

That does not mean the METC is useless. It still matters if you are not incorporated, if your HSA budget runs out, or if your medical expenses are very small. But for most incorporated owners, the HSA is the stronger option.

Short answer

Use this rule of thumb:

  • Incorporated owner: an HSA usually saves more
  • Not incorporated: the METC is usually your main option
  • HSA budget already used up: use the HSA first, then look at the METC for any unreimbursed amount

What is the METC?

The Medical Expense Tax Credit is a way to lower your personal tax bill when you pay eligible medical expenses yourself.

It works like this:

  1. You pay the medical bill yourself
  2. You keep the receipts
  3. At tax time, you add up your eligible medical expenses
  4. You subtract the METC threshold
  5. You claim the credit on what is left

The part that confuses most people is step 4.

You do not get the credit on your full medical bill. You only get the credit on the amount above the threshold.

Simple example:

  • Medical bill: $5,000
  • METC threshold: $2,834
  • Amount that actually counts for the credit: $2,166
  • You do not get that $2,166 back
  • You only get a tax credit on that amount, so the real savings are much smaller

So the METC can help, but it is not a full reimbursement and it does not usually cover a large share of the bill.

What is an HSA?

An HSA is usually set up as a Private Health Services Plan (PHSP). In plain English, your corporation reimburses eligible medical expenses through a proper plan.

The usual tax treatment is:

  • The corporation generally deducts the cost
  • The reimbursement is generally not taxable to you if the plan is set up properly
  • There is no METC-style threshold before you start getting value

This is why HSAs are popular with incorporated business owners. They turn eligible medical costs into a corporate expense instead of a personal after-tax expense.

For more detail on the tax rules, see the HSA tax guide for corporations.

Why the HSA usually saves more

For incorporated owners, the HSA usually wins for three simple reasons:

  1. The METC has a threshold. Part of your medical spending gets no credit at all.
  2. The METC is only a partial credit. Even after the threshold, you do not get the remaining amount back dollar-for-dollar.
  3. An HSA uses corporate dollars. You usually avoid the extra personal tax hit that comes from taking money out of the corporation first and then paying the bill yourself.

That is the big difference:

  • METC: pay personally, then get a bit back later
  • HSA: let the corporation cover the expense in a tax-efficient way from the start

Simple example: $5,000 medical bill

Let us use a simple example.

Assume:

  • You own a corporation
  • Your net income is $95,000
  • You have $5,000 of eligible medical expenses

If you use the METC

  • Medical expenses: $5,000
  • METC threshold: about $2,834
  • Amount above the threshold: $2,166
  • Estimated federal and provincial tax savings: about $411

So you pay $5,000 yourself and get back about $411 later. Your real cost is still about $4,589.

If you use an HSA

  • The corporation pays the $5,000 expense through the plan
  • If the admin fee is 8%, that adds $400
  • Total corporate cost becomes $5,400
  • At a 12.2% small-business corporate tax rate, the deduction alone saves about $659 of corporate tax
  • On top of that, you usually avoid needing to pull extra taxable salary or dividends out of the corporation just to pay the bill personally

In this simplified example, the HSA creates at least $659 of visible corporate tax savings.

That is already about $248 more than the $411 tax savings in the METC example. In real life, the HSA advantage is often larger because you may also avoid personal tax by not taking extra money out of the corporation to pay the bill yourself.

Illustrative note: exact HSA savings depend on your province, corporate tax rate, personal tax rate, and how you pay yourself. Exact METC numbers also change slightly each year.

When the METC is the better choice

The METC makes more sense in these cases:

  • You are not incorporated. Most people in this situation use the METC.
  • Your medical expenses are very small. If your costs are only a few hundred dollars, HSA fees may not be worth it.
  • Your HSA budget is already used up. The METC can still help with unreimbursed expenses.
  • You are a regular employee without access to a corporate HSA. The METC is the normal fallback.

Can you use both in the same year?

Yes, but not on the same expense.

Simple rule:

  • Reimbursed by HSA: cannot also be claimed under the METC
  • Not reimbursed by HSA: may still be claimed under the METC if it qualifies

Example:

  • Total medical expenses: $8,000
  • HSA budget: $5,000
  • Put the first $5,000 through the HSA
  • Check whether the remaining $3,000 can be claimed under the METC

This is a common smart split: use the HSA first, then see whether the leftover amount is still worth claiming personally.

What is the METC threshold?

The METC threshold is the part of your medical spending that gives you no METC credit.

It is the lower of:

  • 3% of your net income, or
  • $2,834 for the 2025 tax year

For a simple mental model, use this table:

Net income METC threshold
$50,000 $1,500
$70,000 $2,100
$94,500 or more $2,834

This is why the METC often feels underwhelming. A chunk of your spending gets ignored before the credit even starts.

Frequently asked questions

Is the Medical Expense Tax Credit refundable?

No. The METC is a non-refundable tax credit. It can reduce tax you owe, but it does not create a refund by itself.

What medical expenses qualify for both the METC and an HSA?

They generally use the same CRA medical-expense rules. Common examples include dental, prescriptions, vision, physiotherapy, mental health care, fertility treatment, and medical devices. See the full eligible expenses list.

Does the METC threshold change every year?

Yes. The yearly cap is indexed, so check the current CRA amount when you file.

Can I claim my spouse's medical expenses on the METC?

Yes. You can generally claim eligible expenses for yourself, your spouse or common-law partner, and dependent children under 18. The lower-income spouse often gets the better result because the 3% threshold is lower.

How fast is an HSA reimbursement compared to the METC?

With the METC, you usually wait until tax filing season to see any benefit. With an HSA, reimbursement timing depends on the plan and administrator.

Is there a maximum amount for the METC?

There is no hard cap on total expenses you can list, but the METC is still only a partial credit on the amount above the threshold. So the real savings are often modest compared with the size of the bill.

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