Thousands of Canadians work in the energy sector as contractors. Contractors usually have more freedom, flexibility, and favorable fiscal conditions than employees. A key part of these conditions is being able to expense or deduct costs of business. Office, transportation, and daily operations are often exempt from taxable income.
Here's another key deduction for Oil & Gas Contractors in Canada that is often overlooked.
Medical Expenses
As a contractor, there's 3 ways to pay for your medical expenses:
- Traditional Health Insurance
- Out of Pocket
- Health Spending Account
If you are an owner operator, you may discover how expensive and restrictive personal health insurance can be. Alternatively, you may also discover just how pricey medical expenses can be when you pay for them out of pocket.
By using a Health Spending Account, 100% of your out of pocket medical expenses can be deducted from your income. The is a critical and often overlooked tax deduction for oil & gas contractors in Canada.
$1,000 Example
Let's take a look at a $1,000 medical expense that you had to pay for out of pocket (either uncovered by your insurance plan or just because you have no insurance).
Instead of paying for the $1,000 personally, as an after tax expense, set up a Health Spending Account with your business. Your business will deduct 100% of the cost and you won't have to declare the $1,000 as part of your personal income.
If you make $140,000, you'll save about 30% on every dollar you spend on medical expenses.
No Premiums and 100% Coverage
Unlike traditional health insurance, a Health Spending Account has no premiums. Additionally, there are over 124 eligible items that are 100% eligible through a Health Spending Account.
Bottom line, consider all of your out of pocket medical expenses as an additional tax deduction for your business when you have a Health Spending Account. This could mean thousands of extra dollars in tax deductions.
Are you an Oil & Gas contractor in Canada? Discover Health Spending Accounts and how over 30,000 small business owners have been using these plans over the past two decades as a viable alternative to health insurance.
To find more tax deductions that may benefit you, read up on Small business tax credits and deductions.
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