Private Health Services Plan: If you could save at least 15% in taxes on every dollar that you pay for health and dental costs, would you?
Private Health Services Plan (PHSP) or commonly referred to as a Health Spending Account or Cost Plus plan, can save you taxes by structuring your health and dental expenses through a PHSP.
How does it work?
In order for you to pay for your health and dental costs, you need to pay tax personally on that money. For example, if you make $50,000/annum and you have $1,000 in health and dental costs that you pay for our of your pocket (after tax), $1,470.59 of your gross salary was used up for medical expenses.
With a PHSP in place for your business, you could process the health and dental expenses through your businesses PHSP, saving you the $470.59 that you would have had to pay in taxes to earn the $1,000 to pay for the expenses. There is a cost however, as CRA requires that all health plans are administered by a third party, so that it can be adjudicated. The cost for this is 10%. Instead of your company paying $1,470.59, it will pay $1,100, saving you, as the business owner, the $370.59. As the expenses and or income gets higher the savings become greater.
To find out more, please contact us for this and other tax savings tips.