What are Health Spending Accounts
A Health Spending Account is a special type of ‘bank’ account, it’s actually a ‘Trust Account’, established under Canada Revenue Agency rules, that allows a Canadian tax payer to set aside a portion of their gross income before tax, pay no tax on this money, and deposit the full amount into an account to be used exclusively for the family’s Health Care Expenses.
Those expenses can include any service performed by, and any product prescribed by and dispensed by, a licensed medical practitioner within the province that you live. That definition covers the vast majority of all out-of-pocket medical costs that you might have.
The simplicity of these accounts, and the way our Canadian tax structure works, guarantees that setting up a Health Spending Account will be a big benefit to anyone that has a taxable income in excess of $40,000, and spends any of their ‘personal’ dollars on health care. That means if you have to pay for any portion of the health care services and products you or your family receive, either as a co-pay with your group insurance, or if you are not covered by a group insurance plan, or because you aren’t covered for that particular service, or because you spend more on that particular service than your plan will reimburse, or you happen to have used the service in the wrong time frame to be reimbursed by a group plan.
A HSA will also cover items like supplements, supports, orthotics, glasses, laser eye surgery, orthodontic work or braces. It could be used for larger ticket items like supporting a family member in a nursing home, or a child in a special needs school, cosmetic surgery, or fertility treatments. Any portion you pay of the cost of a group insurance plan that you do have, whether it is offered through your place of work, or through an association, will also be eligible. All of these costs and more, currently paid for with after tax dollars, can be made into a 100% tax deductible expense by using the structure of a Health Spending Account. A typical Canadian family will receive a tax break of somewhere between $900 and $2400 the first year, and then each and every year thereafter that they continue to have medical expenses and pay taxes.
The actual set-up of your HSA will slightly different depending on your employment, your spouses employment, and whether or not you are currently covered by a Group Health Benefits Plan. We’ve built a section of our website that will give you information tailored to your specific situation, please see our section on “How Will an HSA Work In My Specific Situation?”
Please read on for a list of frequently answered questions. If any of the answers are unclear, or if your question is not answered, please send us an email to let us know, and so we can add this information to our site.