Happy Belated Tax Freedom Day!

I can’t believe I forgot yet another Tax Freedom Day. I am so busy this time of year. I didn’t even get my Happy Tax Freedom Day cards out into the mail until last night. What an embarrassment.

But yes, Tax Freedom Day was last week, June 14th to be exact. Virtually every Canadian added some extra cash to their pay cheque as of June 14th and to be honest, it could not have come at a better time. It costs $100.00 to fill my car each week and the price of food (based on the price of corn) continues to climb along side.

I think Tax Freedom Day will always be a bit of a second-rate holiday for people like me. While it is an important day for most Canadians, it holds little importance for HSA owners. After all, they already enjoy a greater degree of tax freedom when it comes to their medical expenses. When an individual business owner experiences savings of $5,000-$10,000 a year for their high-cost medical expenses through an HSA, you can understand why Tax Freedom Day is a bit over-rated. After all, an additional $150.00 in their pocket from mid-June to December isn’t going to change the world. They have turned Tax Freedom Day into a year-long event. Sort of like those neighbors who leave their Christmas lights up all year long…because they can’t get enough of the holidays I suppose.

But I am always looking for a reason to celebrate and even though I missed the official date, I still have 30 people coming over on Saturday for a Tax Freedom Day BBQ. You know, the kind where you drink lower-taxed domestic beer versus imports and play games like “pin the tail on the finance minister”. That reminds me, I need to order my dollar-shaped cake for the party!

The RRSP Countdown Is On – Are You Spent?

It is the last week for Canadians to make contributions into their RRSP to take advantage of the tax-deduction for 2007.  I myself have received numerous calls from my financial advisor reminding me to top-up my contributions for 2007 and letters indicating that my advisors will be available until the wee hours of the night to help me should I decide to add more to my investment plan.  It makes me wonder, how many Canadian small business owners would put more into the RRSP each year if they could free up the extra money?  Are they spent?

Financial advisors tend to focus on the after-tax money available to invest as opposed to looking at ways to free-up pre-tax dollars as a tool for investing.  For many small business owners, the HSA is an unknown option.  Each year, they take a few of their after-tax receipts and make a claim for the medical tax credit.  A nice gesture from the federal government to reimburse for medical expenses but certainly not enough to give someone more money to invest.  The reality is that if they had a Health Spending Account, they could be using the tax-savings to re-invest into their retirement plan.

Each year, some financial advisors look for ways their small business clients can contribute more without giving them any real options to free-up the funds to do it.  To all my readers out there who are financial advisors with small business clients…get them an HSA today!  Show them how they can make their current after-tax expenses into pre-tax business deductions.  Show them how this will impact their taxable earnings and how they can use the savings to re-invest in their RRSP!  Given the economic conditions and the tough time your clients have had this year, this is a great way to show them how resourceful you are in finding ways to build wealth for them using a readily available and sensible solution – the HSA.