"Health Spending Account (HSA) For the Self-Employed"
by Sandy Winslow
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A health spending account (HSA) is a unique concept in Canada that allows both companies and those that are self-employed to set aside a pool of funds to cover medical costs and expenses. The benefit of the HSA over a savings account is that the amount contributed to the amount used for approved medical, dental and therapeutic treatments is non-taxable for the user. It is also a way to increase your tax deductions as an employer since the amount that is contributed is a tax deduction.

Often the self-employed worker is not able to capitalize on the tax breaks and insurance coverage advantages offered to medium and large sized businesses. The health spending account HAS is definitely an exception to that statement on a variety of levels.

Any self-employed person can choose to open a HSA and can claim the amount they contribute, as the company owner, as a deduction for that year. There is a limit or a cap on the amount that can be invested, but it does make a substantial difference in your taxable income for virtually all self-employed people. However, not only will you be able to claim your own health related expenses as a sole proprietor, you can also elect to cover your family as well. The corresponding bills for these medical and dental services are also tax deductable from your company income, a great way to ensure a minimum tax rate for your income level.

A health spending account (HSA) has to be administered by a company or service provider that meets the standards and regulations outlined in the Income Tax Act of the Canada Revenue Agency. Even though when you take out the plan as a self-employed individual you will be creating a situation where you are the insurer, there are still significant guidelines and regulations that must be put into place to allow the deduction to be eligible under Canadian laws. Working with a company that has significant experience and a strong background in setting up PHSP or private health services plan is a very important consideration.

Self-employed individuals can use the health spending account (HSA) in the same ways as any large company. If the individual or family already has insurance, the HSA can be used to claim any amounts not covered by the current insurance policy. This may include deductions for non-traditional types of therapies and treatments. Most typically these are chiropractic, physiotherapy, massage therapy or acupuncture. While traditional insurance may provide a small portion of coverage, there are typically very low annual limits and the HSA can be used to cover the difference between insurance costs and actual expenses. With no limits on the claims through the HAS, the benefits are evident. Similar to all types of claims, it is essential that the individual provide proof that the treatments specialist they are seeing is licensed to practice.

For self-employed professionals a health spending account (HSA) makes great financial sense. Besides alternative treatments that aren't covered by insurance, these programs also provide funds for vision coverage, dental work and even prescription medications. The difference between what provincial or other types of private insurance provide coverage for and what your actual expenses are is all claimable based on the specific requirements of the company that you select. Checking out a few different companies is highly recommended since there are variations in the fees, processing time and the coverage options offered.

Self-employed individuals can take advantage of the tax breaks as well the pool of funds created with a health spending account (HAS).

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Sandy Winslow

vmeasures@submitmix.com
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Health Spending Account HSA

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