subject: Tax Payer Health Account Spending [print this page] Tax Payer Health Account Spending Tax Payer Health Account Spending
Health Spending Accounts grow in usage each day in Canada. It's forecasted that in 3 to 5 years nearly all Canadians are going to be using Health Spending Accounts (HSA) to get relief from the taxes they pay and increase the amount of money they have available, tax-free, to pay for health care fees for themselves as well as for their loved ones.
The service fees of using a Health Spending Account, be it a Heath & Welfare Trust (HWT) or maybe a Personal Health Services Plan (PHSP), are considerably a lot less than paying out the same taxes on those earnings, but they may be a bit different to comprehend.
If you use your own capital to cover health care costs (either the price of your health insurance plan, or the expense that your health insurance policy just doesn't cover), you earn the money, pay the income taxes (at rates as high as 48%), and just use what's left to pay for the health care fees. Additionally, it is quite possible that you could be eligible for a rebate called the Medical Tax Credit, but first there's a deductible equal to 3% of your income (so, no credit in any way for that amount), and for any amount above that you receive merely a tax credit, not a deduction, so your benefit is bound to the lowest tax bracket amount inside your province.
An average Canadian family spends between 3 and 7 thousand dollars every twelve months on health care fees. If they're lucky enough to become covered by a health insurance policy because of their work, union, or association, they could gain some coverage, but often they have to cover half or even more of the monthly price of the plan themselves. For anyone who is self-employed, or perhaps a small business owner, you have to pay the entire expense of any health plan membership yourself.
By using a Health Spending Account, you deposit the full amount of money (before taxes) to your HSA account. You'll pay an upfront fee of about 10% (possibly less if you are in a larger group plan), as well as GST or HST on the administration fees. There is also a additional tax levied by many provinces - the premium tax. This tax is commonly around 2% and is charged on all insurance type products - car insurance, house insurance, life insurance, and Health Spending Account deposits. When all is said and done, your total fee will be some where within the 12-14% range, dependant upon your province.
So now you know where the savings proceeds from! When you're using a Health Spending Account for your family's health care costs, you might be choosing to pay for 12-14% (for fees and taxes) instead of give up as much as 48% in income taxes to the Canada Revenue Agency - the savings mount up pretty quickly!
