If you’re self-employed, and do not have dental or medical benefits, then a Health Welfare Trust (HWT) can save you a lot in taxes.
Here’s how it works:
- Your corporation pays a specified amount (e.g. $5,000) to an Insurance Company that administers the HWT for your company
- Your corporation will receive a tax deduction for the amount paid and held in the HWT
- You pay for medical expenses personally (e.g. doctors fees, prescription drugs, etc)
- You submit a claim to the insurance company and it will reimburse you for your out-of-pocket costs (up to the amount in the HWT, e.g. $5,000). This reimbursement is received tax-free by you.
In substance, you have converted a personal medical expense into a tax deduction for your corporation!
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.