As a small business owner, is there a way to save on tax using my family’s medical expenses? The short answer is, absolutely! There are a couple of different ways.
Eligible Medical Expense Claims for all Taxpayers
First, not only business owners, but every taxpayer has the right to claim eligible medical expenses on their personal tax return every April. There are a couple of downfalls though. The medical tax credit doesn’t kick in until you have more than 3% of your net income in expenses or $2,237 (whichever is less). So, a taxpayer with an income of $75,000 would get no benefit from spending over $2000 on medical expenses. Also, this is a credit, not a deduction, and deductions are always better!
HSA Deduction – Small Business Owner Benefit
One benefit of being a small business owner is that you can choose to have your business set up a Healthcare Spending Account (HSA) which is a deduction to your business income. Every dollar your business spends is eligible, no minimum like the tax credit. You get to choose the monthly amount that makes sense for your situation. When you have an eligible expense, you can submit the receipt and be reimbursed 100% from this account (up to the account balance). On top of that, this reimbursement usually only takes a couple of days! Moreover, even if your spouse has benefits from their employer, which may only cover a portion of the difference, can also be reimbursed from your HSA. It includes everything that you are out of pocket for yourself, your spouse, and all dependents.
There is a long list of eligible expenses on CRA’s website www.cra-arc.gc.ca/medical. Take a look, you may be surprised at the items that you may have missed taking advantage of in the past. Getting a HSA setup is just one way to maximize your hard earned dollars and save on tax. If you want to learn more about the HSA deduction and other benefits of being a small business owner, please contact us and we would be happy to chat!