If you're an owner of an incorporated business, there is a better way.
Health Spending Accounts make health and dental expenses tax-free to you, your family and your employees and tax-deductible to your business.
Health Spending Accounts, commonly referred to as HSAs, are an increasingly popular alternative to conventional group health and dental plans.
They are a practical and flexible means of providing business owners and employees with meaningful, tax-effective health and dental benefits with predictable annual costs.
A small business owner has 3 options to pay for medical expenses:
The first option is to use a traditional health insurance plan. Many small business owners discover insurance plans are expensive, restrictive, and complicated.
The second option is to pay for medical expenses without insurance (out-of-pocket). By opting to self- insure, the business owner is on the right path but soon discovers the tax consequences of paying for a medical expense personally (with after-tax dollars).
The third option is a Health Spending Account. The small business owner effectively uses the HSA as a tax vehicle and converts personal medical expenses into a legitimate business expense.
HSA’s work very differently than traditional group or individual health and dental insurance programs in that there are no insurance premium payments.
If you operate an incorporated business, have medical expenses and receive T4 income then you qualify for an HSA and it will save you money.
Health Spending Accounts are not available to unincorporated business owners without arms-length employees, as Canada Revenue Agency (CRA) would view such payments under an HSA as a Taxable transfer of funds, even if a Third Party is used as an intermediate step in the transfer of funds.
A significant additional benefit of a Health Spending Account is its very wide range of eligible expenses. Unlike most traditional health insurance plans, any type of expense that is classified as "medical" can be claimed under an HSA. For example, laser eye surgery, professional massages, chiropractic services, and reading glasses are all eligible HSA expenses.