How To Make Your Medical Dental Plan Costs Tax Deductible
Make your medical and dental plan costs tax deductible with a Private Health Services Plan (PHSP)
Here’s a little known but unique way to cover your Health & Dental costs and have them tax deductible.
Now small businesses can deduct health and dental costs the same way they deduct other business expenses.
You wouldn’t buy a computer for your business without it being a tax write off, so why not take advantage of write offs for all health and dental costs?
So, would you like to be able to use your health and dental expenses as 100% write off?
If you said yes (and who wouldn’t) you can take advantage of a program that allows you to do just that!
There are only 3 ways to pay for medical expenses:
1. Traditional insurance with monthly premiums
2. Paying from your personal bank account (paying out of pocket)
3. Your company paying these expenses by using a Private Health Services Plan (PHSP)
Traditional Insurance
With traditional insurance, you MUST be insurable, and you pay a monthly premium, month after month even if you never make a claim.
Of course, if you do have a claim there is a good chance that you will still have to pay a deductible or co-payment; meaning you are rarely covered 100% for services you need.
For example, you may have 100% dental coverage but only on scaling, cleaning, fillings, examinations and polishing.
If you need a crown or some other specialty item you are only covered at 50%. What if your child needs braces?
Are they fully covered? Often not!
In reality you could be paying up to $1.60 for every $1.00 in health care expenses.
When you purchase health insurance you typically do so because you would like to be able to have your
health and dental costs covered by the insurer, so you don’t have to take the money out of your own pocket.
Shouldn’t this mean that you would spend less money?
Well, interestingly enough you actually spend on average .60 cents over and above every dollar worth of benefits you receive.
If you end up using more coverage dollars yearly than you pay in premiums then your premiums will go up.
Paying Out of Pocket
We all know that money we earn through our work whether it be from an employer or through our own companies is taxed.
If we look at an example of spending $3,000.00 in medical and dental bills throughout a year, what did we actually have to earn to pay those bills. If you earned $50,000 a year and had $3,000 in medical expenses you would have to earn $4,411.76 to have $3,000 cash in hand after taxes.
We all have the ability to write off a small portion of medical and dental expenses on our personal tax returns but it is very minimal.
For example if you had earned 50K a year and had $3,000 in medical expenses you would have approximately $255 as an allowable deduction on your personal return.
Kind of begs the question “Why bother”!
So;
What is a PHSP?
A Private Health Services Plan allows you to expense your medical and dental costs (for you and your employees) through your company!
By way of a backgrounder:
In 1988, CRA (Canada Revenue Agency) allowed that if your medical and dental benefits are administered through a third party arms-length administrator, they can be 100% tax deductible to your company.
These benefits are also not a taxable benefit to you or your employees!
This means with a PHSP you are able to have a third party arms-length administrator administer your benefits plan for you and you have the maximum tax savings possible.
Oh, and the best part!
No medical underwriting is required!!
So, who is eligible?
Well, if you have an incorporated business, limited company or sole proprietorship you qualify.
The size of your business does not matter. You could be the only employee or you could have numerous employees.
However, if you are a sole proprietor to be eligible to qualify for this deduction you must meet one of the following:
1. Your net income from business in which you are regularly and actively engaged must represent at
least 50% of your net income for the year.
2. Your net income from sources other than business does not exceed $10,000.
So, how does it work?
Well, once you have enrolled your business you can start submitting claims immediately.
You pay your health or dental expenses as you normally would.
Take a look at this simple scenario to illustrate how your Private Health Services Plan (PHSP) could work in this case…
Example:
You pay your dentist $1,000 for dental work done.
Your employer or your company then sends the administer your benefits plan (as required by the CRA) the receipt and a cheque to cover the expense, along with a 10% administrative fee both of which are 100% tax deductible.
The administer your benefits plan then provides the employee personally with a tax-free reimbursement
of the expense incurred and sends the company a tax receipt for the full expense and the 10% administration fee to claim as a business expense.
You receive your $1,000 reimbursement tax-free and the company receives a receipt for $1,105.00 which is 100% tax deductible to your business.
The claims process and issuing of reimbursement cheques typically takes between 5 and 7 days, you don’t have to wait weeks to get your money back.
So, keep more of your money this tax year!
Start your own Private Health Services Plan today!
For more information on details on how to set up your own PHSP, contact me, Mark Huber, CFP at 604-207-9970 or e-mail us at: askmark@HowToUseInsuranceToCreateWealth.com
