I’m Colin Sabourin, Certified Financial Planner and investment advisor with Harbourfront Wealth Management. Today, I’ll be showing you how to tax-efficiently convert your family’s healthcare costs, into a corporate expense with the use of Private Health Service Plans.
Here’s our scenario. You go to the dentist for your annual checkup, and lo and behold they’ve got bad news for you. You’re going to need some dental work done, and you’re staring at an $11,000 bill.
You call your accountant up and say, “Just a heads up, I’m taking more money out of my corporation than we planned. I have an $11,000 bill to pay.” Come tax time, your accountant does his best to lower your taxable income, but there’s only so much that can be done without proper planning. Assuming a 45% personal tax rate, your corporation will need to come up with $20,000 to net you $11,000 after personal taxes.
There must be a better way!
Is there a better and more tax efficient way of doing this? Yes, there is! By setting up a Private Health Service Plan for your corporation prior to going to the dentist.
Here’s how they work:
- Step 1: Pay for your health expense personally.
- Step 2: Submit your expense to your corporate Private Health Service Plan.
- Step 3: Your health expense gets approved by your Private Health Service Plan as per CRA’s allowable expense list.
- Step 4: Your corporation returns the $11,000 back to you personally as a tax-free employee benefit.
There you have it; it’s that simple. You’ve converted your personal $11,000 bill into a corporate expense, and your corporation is only out $11,000 vs. the $20,000 in our first scenario. You just saved $9,000!
Who can benefit from this type of plan?
Does this strategy make sense for you? If you have a corporation, have health and dental bills, and you want to pay less taxes – then yes, you can benefit by implementing a Private Health Service Plan.
For more information on Private Health Service Plans and the type of expenses CRA allows, feel free to get in touch with us through the Contact Us section.
Until next time…
Colin Sabourin is a Winnipeg based Financial Advisor whose specialty is working with farmers. His focus is on farmers who are planning to sell or transition their farms in the next 5 to 10 years. Colin ensures the process is as smooth and tax-efficient as possible, while also creating plans to enable them to start the next chapter of their lives with confidence and security.