Why an accountant isn’t always enough



When it comes to your finances it is best to have a team of professionals, each with different
knowledge and skill sets, giving you advice. Your team should not solely include an accountant,
but also a lawyer, financial planner, portfolio manager, and more. Each of these professionals
brings a different opinion to the table and occasionally one may bring a unique way to help that
the others may not have thought of. Nothing exemplifies this more than a recent conversation I
had with an accountant about one of their clients.

This accountant was excited to share how he was able to save his client $450 by using the
Healthcare Tax Credit. (That is the tax credit you receive if you do not have a drug and dental
benefits plan through your work). His client was a small business owner and despite his wife
having benefits at work, they still spent $3500 on co-pays and deductibles, that weren’t covered
under her plan. Since the couple was in a high tax bracket (47+%), they had to earn over $6
600 to pay the 47% income tax and net out the $3 500 to pay the expenses. Then they had to
wait until they got their tax-return to get the $450 back. I mentioned to the accountant that there
is a better way.

Traditional Health and Dental insurance plans have been a popular benefit for employers to
offer to their employees. It is the only benefit in the Income Tax Act that is 100% tax-deductible
to an employer AND tax-free to the employee. The old school insurance solution would be for
the husband’s company to purchase another Health and Dental Insurance Policy that would pay
for the portion of the co-pays and deductibles that the wife’s existing plan doesn’t.
Unfortunately, this may not cover all the expenses and the cost to the company may exceed the
benefits received.

This is where a Healthcare Spending Account (HSA) is a better option. An HSA is administered
by a third party company and acts in the nature of insurance, but it is a way to self insure your
health costs and utilize the tax benefits in the Income Tax Act. Whenever this family had an
expense that was not covered under the existing insurance plan, they could submit the bill to
the HSA administrator who would verify the expense and debit the husband’s business account.
The amount of the expense would be deposited into their personal bank account without any tax

Had the accountant suggested that a Health Spending Account be set up, the client would have
only had to earn $3 850 ($3 500 plus a fee of 10%), in his company in order to pay the co-pays
and deductibles. (The only tax that needed to be paid by either him or his corporation is the
GST on the HSA administration fee). This would have saved $2 750 compared to the $450
savings with the Healthcare Tax Credit.

Are you interested in having a financial team? Are you interested in learning more about Health
Spending Accounts or other ways to save? You can set up a complimentary, 30- minute phone
consultation at calendly.com/mjhfinancial OR email me at michael@mjhfinancial.ca .
After all, what do you have to lose… besides your hard-earned money to the taxman?