Current as of October 2026. Government programs, tax rules and prices change. Check the official sources listed at the end of this page before making a decision, and confirm details with a licensed advisor.
Health spending account tax savings calculator
Compare paying eligible health and dental expenses from after-tax income with paying them through a health spending account. Enter your own figures.
Simplified illustration: it ignores CPP, EI, payroll costs and corporate tax, and assumes every expense qualifies. Whether an HSA is available and qualifies for tax-free treatment depends on your business structure and CRA rules, so confirm with an accountant and a licensed advisor. Not tax advice.
What this calculator compares
Picture an employee who needs new glasses, a dental filling and a handful of massage visits this year. If they pay personally, that money comes from their paycheque after income tax has already been taken off. To have $1,500 left to spend, they first need to earn more than $1,500.
A health spending account (HSA) works differently. As of October 2026, the Canada Revenue Agency (CRA) says that when an employer contributes to a plan that meets all the conditions of a private health services plan (PHSP), the amounts paid are not a taxable benefit to the employee, and payments to employees under a qualifying PHSP are not taxable either. So the employer can fund those same expenses without the employee paying income tax on them.
The calculator above puts the two side by side: the pre-tax income needed to pay personally, the cost of running the same expenses through an HSA, and the difference between them.
How to use it
Each field changes the result instantly. Here is what to enter:
- Eligible expenses per year: the health and dental costs you expect, such as dental cleanings, prescriptions, eye exams or physiotherapy. Not everything qualifies; see what a health spending account can cover.
- Marginal tax rate: the combined federal and Ontario rate on the employee's next dollar of income. The next section explains how to find a reasonable figure.
- HSA administration fee: the percentage the plan administrator charges on claims. Fees vary by provider and plan, so use the figure from an actual proposal or ask an advisor.
- Sales tax on HSA costs: preset to 8% to reflect Ontario retail sales tax (RST). You can change it; the section on taxes and fees explains why.
Finding a marginal tax rate to use
Canada uses progressive income tax: each band of taxable income is taxed at its own rate, and the rate on the last dollar earned is the marginal rate. For an employee in Ontario, the number that matters here is the federal rate plus the Ontario rate for the band their income falls in. CRA publishes the current federal and provincial brackets and rates each year, and those figures are indexed and can change, so check the current year's tables rather than relying on an old number.
As a general pattern, the combined marginal rate climbs as income rises, so the same $1,000 of dental work or physiotherapy takes more pre-tax income to pay for at higher salaries. That is why the HSA advantage tends to look larger for higher earners. If you are unsure, an accountant, payroll software or the employee's own tax return can give a more reliable figure than a rough guess.
Why the result is an approximation
Simply adding a federal and a provincial rate leaves things out. It ignores tax credits, any additional provincial amounts that may apply at certain income levels, and payroll deductions like CPP and EI. Brackets also apply to taxable income, not gross salary. The real marginal rate may be higher or lower, so treat the calculator as a starting point and confirm with an accountant.
A quick illustration (hypothetical, not tax advice): suppose an employee's combined marginal rate is 30%. To pay $1,500 of eligible expenses personally, they would need roughly $2,143 of pre-tax income ($1,500 divided by 0.70). Through an HSA, the same $1,500 with 8% sales tax costs the employer about $1,620 before any administration fee, and each percentage point of fee adds roughly another $15 plus any tax on that fee. The gap of a little over $500 before fees is the kind of saving the calculator is designed to show.
Taxes and fees on the HSA side
HSAs are not free to run, which is why the calculator adds a fee and sales tax. As of October 2026, Ontario's guidance on retail sales tax says RST at 8% applies to group insurance premiums, to amounts paid into funded benefits plans, and to claims paid by the planholder under unfunded plans such as administrative services only arrangements. Any portion that is subject to HST, such as certain administration fees, is exempt from RST.
In practice, that means claims and administration fees may be taxed differently. The calculator applies one sales tax percentage to the whole HSA cost for simplicity, so an advisor or the administrator can tell you exactly how tax applies to a particular plan.
There are also employer-side payroll considerations the calculator leaves out, such as the employer's share of CPP and EI on a salary increase and how other payroll taxes may apply. These depend on your payroll, so the tool does not try to model them. For the bigger picture, see how HSA tax savings work and how employee benefits are taxed.
When the result may not apply
The calculator assumes every expense qualifies and that the plan meets CRA's PHSP conditions. As of October 2026, those conditions include that all or substantially all (90% or more) of the premiums relate to expenses eligible for the medical expense tax credit, that the plan operates in the nature of insurance, and that coverage is limited to the employee, their spouse or common-law partner, and household members related to them by blood, marriage or adoption. If a plan does not meet these conditions, CRA says employer contributions become a taxable benefit.
It also skips the medical expense tax credit. Someone paying personally may claim part of their costs, but only above a threshold: as of October 2026, CRA sets it at the lesser of 3% of net income or a fixed dollar amount that is indexed each year (check the current figure on CRA's site). You can also only claim the part of an expense that has not been and will not be reimbursed. For many people with moderate costs, the credit is small or zero.
Business owners have extra wrinkles. Whether an owner can use an HSA for their own family depends on business structure and whether the benefit is received as an employee, so read about benefits for owner-operated businesses and check with an accountant.
From estimate to a real plan
A calculator can show the shape of the saving, but choosing an HSA means comparing administrators, fees, claim rules and how it fits with any existing coverage. Some employers pair an HSA with insured health and dental coverage; others use it on its own. The guide on HSAs versus group insurance walks through that choice.
When you want real figures for your team, you can get matched with a licensed benefits advisor through GroupBenefitPlans.ca. An advisor can explain how an HSA would be set up and taxed for your business and compare options from the market.
Common questions
Is the calculator result tax advice?
No. It is a simplified illustration based on a marginal tax rate you enter. It ignores tax credits, CPP, EI and corporate tax, and it assumes every expense qualifies. Confirm your situation with an accountant and a licensed benefits advisor.
Why is sales tax preset to 8%?
As of October 2026, Ontario applies 8% retail sales tax to group insurance premiums and to claims paid under unfunded benefits plans. Portions subject to HST, such as certain administration fees, are exempt from RST, so fees may be taxed differently. Adjust the field if your administrator gives you a different figure.
Where do I find my marginal tax rate?
CRA publishes the current federal and Ontario brackets each year; add the federal and Ontario rate for the employee's taxable income band as a rough starting point. Your accountant or tax software can give a more precise figure that accounts for credits and other amounts.
Are HSA reimbursements always tax-free?
Only when the plan meets CRA's private health services plan conditions and the expenses are eligible. If the plan does not qualify, CRA treats employer contributions as a taxable benefit.
Can employees claim the medical expense tax credit for HSA-paid expenses?
Generally no. CRA says you can only claim the part of an eligible expense that has not been and will not be reimbursed, so an expense fully paid by an HSA usually cannot also be claimed.
Sources and further reading
GroupBenefitPlans.ca is a referral and information service. Advice and coverage are provided by the licensed professional and relevant providers. An enquiry does not activate insurance.