Health Spending Account - Why havent we heard of this?

Geoff Cook - CFP, CHAIP

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There is a secret savings account out there Canadians, that few people will ever tell you about its called a Health Spending Account.

I want to take a brief moment to explain what it is, and  you can use it.

What it is...

A Health Spending Account is incredibly simple.

Any money that is put in to a Health Spending Account is a tax deduction to the business and a tax free benefit to the employee. (If you own the business, you can have one too)     The money can then be used for a virtually any medical expenses*.

The key benefits to the account are as follows;

  1. No money is wasted- If the business is incorporated then all money sent out from the business and put in to the HSA will stay in a persons name for life. There will be no spending money on an insurance plan that may or may not get used.
  2. Tax Free Loop Hole - A business can essentially take tax free money out of their Corporation and put it in to their pockets for life.
  3. Cost Control - The cost of benefit plans go up in cost nearly annually. Also if you are buying a benefit plan for a group of employees, you have to give all employees the same plan wether they have been in the company for 1 year or 10 years. With an HSA...You decide how much money you want to give everyone.

There are a few key ways to use this account;

  1. Tax Free money for yourself- Many business owners will open a HSA and fund it personally, just as a simple way to make money more tax efficient. They open an account for themselves through the business and put a certain amount in the HSA every year, knowing that they will be able to use it forever if they dont use it now. Or they can spend the money on other family members.
  2. Controllable Employee benefits - Some company owners use this plan as a sole Group Benefit Plan for their employees. It offers controlable cost, and everyone is comfortable knowing that money will not be wasted on premiums with out being used.
  3. Benefit Plan Supplement - Some people also use the HSA to compliment their current benefit plan. There are often valuable services that are not covered, or not fully covered with a traditional Health and Dental plan. The HSA can cover other services or also be used to cover deductibles or co-insurance.

At the end of the day, a Health Spending Account is a valuable tool for anyone who owns a business. Any opportunity in life to save tax, is a must. We do not grow wealthier by paying avoidable taxes.

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When dealing in financial matters, you are urged to consult an advisor for legal, tax or investment advice. Every effort has been made to present information in a clear, exacting manner. However neither the publisher nor the authors can be held responsible for any losses incurred due to the actions of any individual as the result of this post or any errors or omissions contained herein.

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