What we’re about to show you is NOT simply par-for-the-course; it CAN be avoided.
Say you’ve got a medical expense of $500 that you’ve got to pay out-of-pocket. That might be a dental bill, prescription meds, registered massage therapy, or whatever. It could even be a premium you are paying toward a personal health insurance plan, like Blue Cross.
Where did your $500 come from, to pay this expense? Probably out of your salary or other remuneration; you’ve paid tax on it already.
Say your tax rate is around 30%: your $500 medical expense just consumed $714 of your before-tax pay!
Or said another way, your company had to pay you $714 just so you could pay that $500 bill. In fact, this is no different than paying $500 plus a “service charge” of close to 43%!
At this point you might be thinking one of several things:
- there’s no getting away from tax (but in this case there is!)
- you can recover the loss by claiming the $500 as a medical expense credit on your personal income tax return (in fact, this is often hardly worth it, you’ll just get back a fraction).
- you might be wondering what the numbers are like if your tax rate is higher! Say your rate is 38%. Then a $500 expense consumes $806 in salary, which in turn is akin to a 61% service fee on the $500!
Now what would you say if we told you that the CRA provides a way to reduce that 40%+ to a mere 10%? Surely this would be a no-brainer, a win-win for both you and your company!
Here’s how it works:
- Your company gets a PreTax Health Spending Account
- You claim the $500 through the Health Spending Account
- The Health Spending Account invoices your company for the $500 plus a 10% administration fee
- The Health Spending Account reimburses you the $500.
It’s all completely above board per CRA rules (provided you use a credible Health Spending Account provider!) There is only one proviso: the company must be Canadian and incorporated, but not based in Quebec.
A Health Spending Account is an excellent fit for any company; from single-person companies all the way up to companies with thousands of employees.
You might be wondering how it compares with traditional insurance plans. To oversimplify a little, the smaller the company and the more routine the expenses, the more it boils down to paying a “handling charge” of around 30% in aggregate. It’s also worth noting that Health Spending Accounts cover far more expenses, including many not covered by traditional insurance. In fact, if you’ve already got traditional insurance, the Health Spending Account can pick up the left-over expenses, and often even the premium!
Businesses can Get Millions from the Government via government grants and programs; meanwhile the government is also leaving you cash on the table which you can readily access, simply by having a PreTax Health Spending Account!