HSA Advantage #1 – Easy Deduction

Every few weeks, I will be showcasing a different advantage of owning a Health Spending Account in this segment called…

HSA Advantage…. 

Taxes, we all have to pay them.  Last week, I received all of my paperwork for the newly incorporated Gremolata Media Group Inc.  What a stack of forms!  Of course, one of the first things I noticed was the tax remittance forms…which made me think about the Health Spending Account and how simple it is to deduct as a business expense for the corporation. 

If you own an incorporated entity, whether it is a global conglomerate or simply a corporation of one, you can open a Health and Welfare Trust (HWT) to cover your medical expenditures.  If you are not incorporated, you can open a Private Health Services Plan or PHSP (see below).  After my first wave of forms from CRA, I now understand why so many business owners love their HSA.  Their is no annual paperwork!  The deposits into the HSA are a business expense – nothing more, nothing less.  You do not need to fill out any complex forms or ask for a special return from CRA, you simply add it as a debit to your books for the amount deposited into the employee’s health and welfare trust.  The money is non-taxable for the employee, so you do not need to account for it on their compensation or make complex changes to their T4.

As for PHSPs, the story is a bit different.  It is still a relatively easy process.  On your annual return as an unincorporated sole-proprietor, you simply enter the amount you contributed into your PHSP on Line 9270 – Other Expenses.

When you think about it, the process is pretty simple.  Certainly one of the easier items to report to CRA in terms of business expenses – versus mileage, leases, rent, interest earned/paid, or investments.  So, why doesn’t everyone have an HSA??