Benefits of a Health Spending Account
Allan Madan, CPA, CA
Dental cleanings, prescription drugs, glasses, cavities, massage therapy, antibiotics, contacts….the list goes on and on. Your family spends thousands of dollars a year on medical costs that aren’t covered through OHIP (or your provincial plan). How do you pay for them?
Introducing Health Spending Accounts – the smarter way to pay for your health care!
If you’re self employed a Health Spending Account is a flexible, tax advantageous way to pay for your families medical costs. It doesn’t matter if you’re incorporated, unincorporated, or only have a business on the side. A health spending account might be a great solution to help ease the burden of some of your medical expenses.
Getting started is easy.
- Decide how much you want to deposit into your Health Spending Account, based on your families routine health needs.
- Deposit funds into your Health Spending Account as a business expense. The funds deposited reduce your business’ taxable income and are tax-free for you as an employee.
- Submit your claims to Benecaid to be 100% fully reimbursed* for all eligible medical expenses**.
Here’s an example:
Mike Jones owns his own construction company, MJ Construction. His 12 year old son is going to need braces in a few months. The estimated cost for the braces will be over $5,000. Using a Benecaid Health Spending Account Mike can save over $3,000!
How?
Mike deposits $5,000 into a Benecaid Health Spending Account, thus reducing his company’s taxable income by $5,000. Mike can then use the $5,000 (income tax-free) to pay for his son’s orthodontics. Without a Benecaid Health Spending account he would need to earn $8,835.48 to be left with $5,000 after income taxes and source deductions.
$8,835.48 (Earnings)
-$3,835.48 (Source Deductions: EI, CPP, Income Tax – assuming a marginal tax rate of 43.41%)
= $5,000.00 (Net Income to pay for orthodontics)
With a Benecaid Health Spending Account only needs to earn $5,795.59 to deposit. After administration fees and taxes Mike is left with $5,000 for the orthodontics and a total savings of $3,039.89!
$5,795.59 (Deposited into Benecaid Health Spending Account)
– $795.59 (Administration fees and taxes)
= $5,000.00 (Funds available to pay for orthodontics)
Want to learn more?
Go online – Benecaid’s online Health Spending Account calculator that allows you to see your potential savings and can be used to help you determine how much to deposit for you and your family – http://www.benecaid.com/health-spending-account
Talk to an expert – Lucy van Scheltinga is a Benefits Consultant that has been working with Benecaid for over 8 years. She’s helped hundreds of sole proprietors and business owners save money using a Benecaid Health Spending Account. She can be reached by phone 1-877-797-7448 ext 7265 or e-mail lv@benecaid.com.
Benecaid.
Health Benefits. Simplified
* reimbursement is based on available funds within the account
**eligible medical expenses is in accordance with the rules governing the Medical Tax Credit – please visit the CRA website for a complete list by province/territory.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CPA, CA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
