Psychotherapy and Counselling Services Now Tax-Exempt in Canada

As of June 2024, psychotherapy and counselling therapy joined the list of GST/HST-exempt health services in Canada. For anyone running a private practice, or paying out of pocket for sessions, that one change touches almost everything about how the invoice looks and what the CRA expects at tax time.

Here’s what actually changed when it comes to tax-free psychotherapy in Canada, what it doesn’t change, and where people tend to get confused.

Understanding the Tax Exemption

Before this change, psychotherapy and counselling were treated as taxable supplies under the Excise Tax Act. That meant clients paid an extra 5 to 15 percent on top of the session fee, depending on the province, the same way you’d pay tax on almost any other service.

The exemption removes GST/HST from the cost of these services going forward. It puts psychotherapy and counselling therapy in the same category as most other regulated health services, like visits to a physician or a dentist, which have been exempt for years. Practically, it means a $150 session that used to run $169.50 with 13% HST in Ontario now costs $150, full stop.

What Actually Changed For Clients

The most visible effect is on price. Someone paying privately for weekly sessions was effectively covering a tax bill on top of the service itself, and for ongoing therapy that adds up over months. Removing it doesn’t make therapy free, but it does shave a real percentage off a recurring cost, and recurring costs are exactly where small savings compound.

It’s also worth being clear about something this exemption does not do: it doesn’t touch personal income tax. A common point of confusion is treating a tax free psychotherapy in Canada headline as though it means income tax no longer applies to anyone involved. It doesn’t work that way, and we’ll get into exactly why below.

Benefits For Practitioners

For the practitioners running these practices, this shift changes the pricing conversation with clients and can make private-pay therapy more accessible to people who were priced out by the added tax. Some practices have also simplified their invoicing since there’s one less line item to calculate and explain.

There’s a flip side worth knowing about too, which is what happens to GST/HST registration and input tax credits once a practice’s services become exempt. We’ll walk through that later in this piece, since it’s one of the parts that catches practitioners off guard.

What “Tax Exempt” Actually Means in Canada

What is tax exempt in Canada gets used loosely in headlines, and it covers a few different things that aren’t the same. There’s GST/HST exemption on specific goods and services (which is what applies here), zero-rated supplies (a related but distinct category, like basic groceries), and personal income tax exemptions or credits, which are a completely separate part of the tax system.

The psychotherapy exemption falls into the first bucket. It’s a change to how GST/HST applies to a service, made under the Excise Tax Act, not a change to the Income Tax Act. That distinction matters more than it sounds like it should, because it decides what actually gets cheaper and for whom.

A GST/HST exempt supply means:

• No tax is charged on the invoice for that service
• The supplier generally can’t claim input tax credits on expenses related to providing it
• The exemption applies to the service itself, not to any person’s income

None of that touches how a therapist’s earnings are taxed personally or through a corporation. That’s a different question entirely, and it’s the one that trips people up most.

Does This Mean Therapists Don’t Pay Income Tax?

No, and this is worth stating plainly because the confusion is common enough to cause real filing mistakes. A GST/HST exemption changes what tax gets added to an invoice. It has no effect on the income tax owed on what a therapist earns.

How much income is tax-exempt in Canada is actually answered by the basic personal amount, a separate mechanism in the federal income tax system that lets every individual earn a certain amount tax-free each year regardless of their profession. For 2024, that federal amount sits around $15,000, with provinces setting their own separate personal amounts on top. This applies to everyone filing a personal return, not specifically to therapists, and it existed long before the psychotherapy exemption came into effect.

A psychotherapist running a private practice still reports business income, still pays personal or corporate income tax on their earnings above the applicable exemptions and deductions, and still needs to file exactly as any other self-employed professional or incorporated business would. The GST/HST change affects the invoice their clients see. It does nothing to their T1 or T2 filing obligations.

Who Qualifies for the Exemption?

The exemption is only available to regulated psychotherapists and counselling therapists, those practitioners who are registered with the relevant provincial regulatory college where there is one, in this case the Ontario College of Registered Psychotherapists (CRPO). In the provinces where the regulatory framework is the same as in Alberta, clinical counsellors and psychotherapists are generally eligible under the same requirements.

It becomes more complicated for practitioners who may have several designations or practice in several services. If a practitioner has multiple credentials, such as a registered social worker and also has psychotherapy, for example, they should review which services they are billing for and determine if that service is exempt, because not all of the services that a multi-credentialed practitioner will provide is fully covered.

Where in doubt, it is better to have a discussion directly with a tax professional than to make an assumption on whether a particular practice or service is exempt or not, as the problems will be much easier to avoid than remediate if an incorrect classification is made.

What this Means for GST/HST Registration

This is the part that catches a lot of practice owners off guard. Once psychotherapy services become exempt, practices whose revenue is now entirely made up of exempt supplies are, in most cases, no longer required to be registered for GST/HST at all.

That sounds like good news, and mostly it is, but it comes with a trade-off. A registered business can normally claim input tax credits, recovering the GST/HST paid on business expenses like rent, equipment, and supplies. Once a practice’s services are exempt and it deregisters, that recovery mechanism disappears. The practice is no longer charging tax, but it’s also no longer getting reimbursed for the tax it pays on its own costs.

For a practice that also earns some taxable revenue, workshops, supervision services, or product sales, for example, alongside exempt psychotherapy sessions, the registration decision gets more complicated. Staying registered might still make sense depending on the mix of revenue, and running the numbers both ways before deciding is worth the time.

Is Psychotherapy Tax Deductible in Canada for Clients?

Separate from the GST/HST question is whether a client can claim their therapy costs personally. Psychotherapy tax deductible Canada rules run through the Medical Expense Tax Credit, a completely different part of the Income Tax Act from the GST/HST exemption discussed above.

Generally, amounts paid to a psychotherapist or counselling therapist who is authorized to practice under provincial law can be claimed as an eligible medical expense, provided the total medical expenses claimed exceed the applicable threshold for the tax year. This has nothing to do with whether GST/HST was charged on the session. A client can potentially claim the credit whether or not the fee they paid included tax, since it’s a personal income tax return provision, not a sales tax one.

Keeping receipts that clearly show the practitioner’s name, credentials, service description, and amount paid remains important for anyone planning to claim this credit, regardless of how the GST/HST side of things shakes out.

Record-keeping that Actually Matters Now

For a practice that has become GST/HST exempt, the record-keeping requirements shift slightly rather than disappear. A few things worth tracking:

• Documentation confirming the practitioner’s regulatory registration, since that’s what establishes eligibility for the exemption in the first place.
• A clear breakdown of exempt versus taxable revenue if the practice offers any services outside of psychotherapy or counselling.
• Records supporting the decision to register or deregister for GST/HST, including the date any change took effect.
• Ordinary business income and expense records for income tax purposes, which don’t go away just because sales tax does.
• Client receipts detailed enough to support a Medical Expense Tax Credit claim, since clients will likely be asking for these.

None of this is drastically different from good bookkeeping practice generally. It just shifts what the CRA is actually going to want to see if a practice’s filings ever get reviewed.

The Parts of Mental Health Access this Doesn’t Fix

The GST/HST exemption helps with the price of a single session, but it doesn’t touch some of the bigger structural issues in mental health care access. Wait times for publicly funded services remain long in most provinces. Coverage under private insurance plans varies enormously and often caps annual reimbursement well below what regular therapy actually costs. Availability of practitioners in rural and remote areas is still limited compared to major cities.

None of that is a reason to discount the exemption. Removing tax from a recurring cost genuinely helps people who are paying privately, especially over the course of months or years of treatment. It’s just one piece of a larger set of access problems that a single tax change was never going to solve on its own.

Get Your Practice’s Filings Right from the Start

On the outside, a change like this seems straightforward: just eliminate a tax line in an invoice, but on the inside, there are implications in the GST/HST registration, input tax credit eligibility, revenue tracking and in a practice’s bookkeeping explanations at tax time. Any one of those elements is likely to come up later as a larger issue than necessary.

If you’re running a psychotherapy or counselling practice and aren’t sure whether to stay registered for GST/HST, or how this exemption interacts with the rest of your bookkeeping, Webtaxonline works through exactly this kind of question with self-employed and incorporated health practitioners regularly.

The same applies once tax season rolls around and it’s time to file. A practice’s income tax obligations haven’t changed just because its GST/HST status has, and filing a corporate or self-employed return without accounting for that shift correctly is an easy way to leave money on the table or trigger a CRA question later. Webtaxonline’s corporate tax team can handle that filing properly the first time, rather than you piecing it together on your own and hoping it holds up.

If your practice has gone through this change recently, book a consultation before your next filing deadline. 

Frequently asked questions

Does tax-exempt psychotherapy mean therapists don’t pay income tax?

No. The GST/HST exemption changes what tax applies to the service on an invoice. It has no effect on personal or corporate income tax. A therapist still reports business income and pays income tax on it the same way any self-employed professional or incorporated practice would.

Can psychotherapy expenses be claimed as a medical expense on your tax return?

Generally, yes. Amounts paid to a psychotherapist or counselling therapist authorized to practice under provincial law can typically be claimed under the Medical Expense Tax Credit, provided total eligible medical expenses for the year exceed the applicable threshold. This is separate from whether GST/HST was charged on the sessions.

Should therapists cancel their GST/HST registration after becoming tax exempt?

It depends on the practice’s full revenue picture. If all of the practice’s revenue now comes from exempt psychotherapy services, deregistering is often appropriate. If the practice also earns taxable revenue from other services, staying registered may still make sense to preserve input tax credits. This is worth calculating rather than assuming either way.

How does the GST/HST exemption affect private psychotherapy practices?

Now clients do not have to pay the GST/HST on the session fee costs; this results in a reduction in apparent costs of counseling sessions. However, for the services that have been deregistered, the right to claim input tax credit on their business costs, including the costs of renting, purchasing supplies and equipment, has been eliminated.

What records should tax-exempt therapists keep for CRA purposes?

Proof of provincial regulatory registration, a breakdown of exempt versus taxable revenue if applicable, documentation of the registration or deregistration decision and date, standard income and expense records, and detailed client receipts that support Medical Expense Tax Credit claims.

Who qualifies to provide GST/HST-exempt psychotherapy services in Canada?

Individuals who have registered themselves with the corresponding provincial body, such as the College of Registered Psychotherapists of Ontario in the case of Ontario, etc., will be eligible. Individuals having more than one credential must find out the exact type of services they are offering to determine whether those are under the exemption list.