With this new year comes a new tax to-do list for Canadian dentists. Policy changes, program expansions, and plan roll-outs mean significant adjustments in everything from recordkeeping practices to reporting. This article outlines 2025 tax changes for dental professionals alongside other important updates worth prioritizing in the year ahead.
Input Tax Credit (ITC) Claims Process to Complexify
The Change
The Canada Revenue Agency (CRA) is eliminating a significant tax arrangement that has benefited dental practices for years. Starting in 2025, dental professionals can no longer automatically claim 35% of their GST/HST payments as input tax credits. This change limits the use of a simplified accounting method that businesses in the industry have long relied on to handle the complex mix of exempt services and zero-rated supplies they provide.
The Implications
Going forward, dentists will need to put special care into tracking purchases made for commercial activities – specifically the percentage of that investment attributable to business operations and whether given assets qualify as exempt under current capital property rules. Small and medium-sized dental offices may find it particularly challenging to adapt their existing accounting systems to meet these new requirements.
New Canadian Dental Care Plan (CDCP) Expands
The Change
At the beginning of 2024, the Government of Canada got serious about its plans to roll out a national care program for citizens who can’t afford the full cost of dental care. The Canadian Dental Care Plan (CDCP), co-administered by Sun Life, will continue rolling out into 2025. Children and youth under 18 as well as seniors and Disability Tax Credit (DTC) certificate-holders have been eligible to submit applications for the CDCP thus far. This new year, all Canadian residents with an adjusted family net income of less than $90,000 and who don’t have dental insurance will qualify. Levels of CDCP coverage differ between income brackets, where lower-earning households stand to receive more financial support for dental services.
The Implications
The Canadian Dental Care Plan is an excellent opportunity for dentists because it expands access to dental care for millions of previously uninsured Canadians. This means a larger potential patient base and increased demand for dental services across the country. The program also ensures reliable payment for services rendered through a standardized claims process.
However, benefitting from the CDCP isn’t without upfront work. Anyone looking to participate will need to sign the CDCP Claims Processing and Payment Agreement, which outlines details regarding the validation of CDCP client information, eligible services under the program, and payment processing from Sun Life. It’s also important to assess how federal coverage works alongside provincially administered plans like the Ontario Dental Association Fee Guide and NIHB coverage.
From a tax perspective, practices should implement robust accounting systems to separate CDCP-covered services from other revenue streams. Administrative staff will need training on the new billing procedures and documentation requirements specific to CDCP claims processing through Sun Life’s portal.
Expanded Public Service Dental Care Plan (PSDCP)
The Change
The Public Service Dental Care Plan (PSDCP) is set to change in several respects come 2025. A comprehensive dental benefits program provided by the Government of Canada for eligible public service employees and their dependents, this program currently covers a wide range of dental services including preventive care, basic restorative procedures, major restorative work, and orthodontic treatments. Coverage levels vary depending on the specific service, with the plan typically paying between 80-90% of eligible expenses for basic services and 50-80% for major procedures.
Yearly annual maximal reimbursement limits will increase over the latter half of the decade, from $3,000 per year starting on January 1, 2025, and from $3,250 per year starting on January 1, 2027. Other notable improvements include higher lifetime maximums, enhanced coverage for major restorative work, and more flexible provisions for specific medical circumstances such as cancer treatment.
The Implications
Every Canadian dental practice has the responsibility to ready its billing systems for these upcoming policy changes. Staff will need training on the new reimbursement thresholds and coverage categories to ensure accurate claims processing. Accounting software may require updates to reflect the revised fee structures and maximums. Additionally, dental offices should prepare patient communication materials explaining these changes, as they will affect out-of-pocket expenses and treatment planning discussions. Clear documentation and verification procedures will be essential to maintain compliance with the updated PSDCP guidelines.
We’ve Already Prepared for These 2025 Tax Changes for Dental Professionals
Accounting-related law is kind of like oral hygiene – the more you pay attention to it, the less likely problems are to develop. Knowledge of these 2025 tax changes for dental professionals will make planning for the coming year easier. If you want to extend that peace of mind to actual bookkeeping and document preparation, Dental Tax has solutions.
Our services are specially designed for Canadian dental practices. We stay current with industry-specific regulations so you don’t have to – making for more streamlined operations and less stress around tax time. Contact us today to learn how we can support your financial health.
Adam has an MBA from the Richard Ivey School of Business in London and also holds a Chartered Investment Manager designation.
- 2025 Tax Changes: What Dental Professionals Need to Know - January 3, 2025
- Dental Practice Accounting Basics: Essential Guide - December 13, 2024
- Essential Year-End Tax Tips for Dental Professionals to Maximize Deductions - November 29, 2024
