In Canada, small business owners can use a health and dental plan called the Health Spending Account (HSA)... not to be confused with a Health Savings Account.
Health Spending Accounts are fundamentally different than the USA-based Health Savings Account.
Gym memberships are not eligible in a Health Spending Account. However, a gym membership would be eligible in a Wellness Spending Account since it is a taxable spending account.
What is a Health Spending Account (HSA)?
A Health Spending Account (HSA) is often referred to as a Health Care Spending Account (HCSA) or Private Health Services Plan (PHSP). These names are used interchangeably and usually mean one and the same thing.
A Health Spending Account is a cost-effective way to provide health and dental benefits to employees. In simple terms, health and dental benefits offered through this plan are fully tax deductible to the business and received 100% tax free by the employees. There are no premiums, hidden fees, deductibles, copay, or complex policies.
What's covered in a Health Spending Account?
Unlike typical health insurance plans, a Health Spending Account offers 100% coverage on a wide range of expenses. There are no premiums, restrictions, or deductibles.
Best of all, a Health Spending Account can work in conjunction with a health insurance plan (if you or a spouse chooses to keep insurance) Premiums contributed to health insurance and expenses not reimbursed by the insurance plan are both eligible expenses in a Health Spending Account.
In short, a Health Spending Account covers many popular and expensive medical expenses such as prescription drugs, massage therapy, hearing aids, prescriptions glasses, physiotherapy and more.
Besides the standard list below, some medical expenses are eligible on a case by case basis. If the service or product is a medical requirement, then ask for a doctor's note and in most cases, you will qualify for the claim.
The list of eligible expenses are determined by the CRA. Any medical expense that can be claimed on your taxes through vehicles like the Medical Expense Tax Credit, will also be qualified for a Health Spending Account.
For a full list of eligible expenses, check out 2019 Eligible Expenses for a Health Spending Account.
Who is the Health Spending Account for?
If you own an incorporated business, then Health Spending Accounts are the better way to pay for medical expenses. Through the plan, any health and dental expenses become tax-free for you, your dependants, and your employees. They also become a tax-deduction for your business.
Download our FREE Guide to a Health Spending Account
For a single person incorporated business:
For an incorporated business with arm's length employees: