One of the most common questions we ask business owners is, “How do you pay for your personal medical expenses that are not covered by your benefit plan?” 95% of the time, the response we hear is, “out of my personal pocket”. As soon as we hear that, we know we can save that person a lot of tax expense they didn’t know they were paying.
Medical Expenses and Tax Deductions
In case you aren’t familiar, the Canadian Revenue Agency allows individuals to claim approved personal medical expenses against your personal income as a tax deduction. The issue is that your medical expenses have to exceed 3% of your annual income to be eligible. For example, if you make $100,000 personally, you need to have medical expenses that total above $3,000 just to qualify for the tax deduction! If you have less than $3,000, you get $0 in tax relief.
A Health Spending Account (HSA) is a Canada Revenue Agency approved method to provide medical, dental and vision benefits in a tax efficient manner. A corporation can write off 100% of the costs related to its HSA. All expenses reimbursed are tax -free to the employees. Medical, Dental and Vision are the standard categories offered to employees in an HSA.
How Would You Like to Save?
Who Should Have a MyHSA Account?
Every business owner who has an incorporated company should have one, even if you have a group benefits plan. It is the most tax effective way to run family medical expenses through the corporation. If you wish to offer benefits to your employees, you can create a custom plan for your employees arranged by class.
MyHSA as an Alternative Benefit Plan vs. a Supplementary Plan
If you do not have a traditional benefits plan, an HSA can be used to provide a complete range of coverage including medical, dental, and vision benefits to your employees who otherwise could not get employer sponsored benefits. If you have already had a traditional insured group benefits plan, you can use a myHSA to “carve out” or “top up” other used coverage such as orthodontics or vision care and make these types of benefits available in a Health Spending Account.
What Kind of Medical Expenses Can I Claim?
Big ticket items like: IVF, laser eye surgery, private surgeries, MRIs. All the traditional items such as: dental, RMT massage, prescription drugs, etc are covered. For more examples, click here.
Is it Easy to Manage and Use?
Yes! Here are some extra features, just to name a few:
• No paperwork! Take a photo of the receipt through your smartphone app
• Company Administrators and Employees have real time access to track activity
• No cheques! myHSA works on EFTs
• All claims can be submitted online by employees through their own personalized dashboard
• Apps available for iOS (iPhone/iPad) and Android devices
• 2 day turn-around time for claim reimbursement
• Live Chat technical support for employees, run in-house by an experienced team
Wouldn’t My Accountant Do This for Me?
Not likely. To set one up, you need to be life/accident and sickness insurance licensed. Most accountants normally have a CA, CGA, CMA etc. but not this specific license.
What does it Cost to Set This Up?
It’s a one-time set-up fee of $250 for 1 class and $100 per class thereafter. Yes, the set-up fee is tax-deductible too. Most times, you can recover the cost of the set-up fee in the first year – every year after you’ll be much further ahead! To change your receipt from a personal expense to a business expense, it costs 10%, which is tax-deductible. The government only charges 5% GST on the 10% admin fee.
I Want to Save on my Taxes – How do I Set it up?
Please contact us here.