Health Plans and your business
There are several types of health plans that are available to the small business owner and depending on your requirements a review of different ones to find one that will offer the best benefit.
Why should you enter into a health plan? That is an important question and like most people we all have health requirements be it the need for a dentist, acupuncture, massage or prescription medications. All of these items are expensive and to some degree they are tax deductible. First everybody needs to look at how the Canada Revenue Agency views these types of expenses for the small business owner be it a proprietorship or corporation; they view it in two ways.
First off normally if the owner does not have a health plan the expense is deductible minus 3% of your taxable income. If the owner has a medical plan the medical expenses including administration fees are 100% deductible (but there are associated costs for the plan, I will show the benefits based on two that I have found).
For example of the owner who has a table income of $100,000 and medical expenses of $6,000 for the year and a tax bracket of 35% and a second example of medical expenses of $3,000 with all other parameters the same.
| Example one | No Plan | HSA with $299 Admin fee and no other costs | HSA with 10% Admin Fee and no other costs |
| Medical Expenses | $6,000.00 | $6,000.00 | $6,000.00 |
| Administration Fee | $0.00 | $299.00 | $600.00 |
| Net medical expense | $6,000.00 | $6,299.00 | $6,600.00 |
| Reduction of taxable medical expense | $3,000.00 | $0.00 | $0.00 |
| Net taxable deduction | $3,000.00 | $6,299.00 | $6,600.00 |
| Tax deducted @35% | $1,050.00 | $2,204.65 | $2,310.00 |
| Net medical cost to owner | $4,950.00 | $4,094.35 | $4,290.00 |
| Example two | No Plan | HSA with $299 Admin fee and no other costs | HSA with 10% Admin Fee and no other costs |
| Medical Expenses | $3,000.00 | $3,000.00 | $3,000.00 |
| Administration Fee | $0.00 | $299.00 | $300.00 |
| Net medical expense | $3,000.00 | $3,299.00 | $3,300.00 |
| Reduction of taxable medical expense | $3,000.00 | $0.00 | $0.00 |
| Net taxable deduction | $ 0.00 | $3,299.00 | $3,300.00 |
| Tax deducted @35% | $ 0.00 | $1,154.65 | $1,155.00 |
| Net medical cost to owner | $3,000.00 | $2,144.35 | $2,145.00 |
It is quite evident that it will cost less for any medical expenses if the owner enters into a Health Plan or a Health Spending Account. There are many types of Health Plans and Health Spending Accounts so it is best to talk to your Insurance provider for advice on which one would be best your needs. I will also be able to assist you in determining which plan would be best suited for you. Just drop me a request and I will be happy to assist you.
