Mastering Health Finances in Canada: The Little-Known Health Spending Account (HSA) Strategy

Here’s health spending account (HSA) strategy that is simple and can have huge tax benefits but is often overlooked.

Health Finances In Canada

How It Works:

You use your carryover each year as a form of self-insurance for larger health expenses. Alternatively, if you’re fortunate enough to decide your HSA allocation, consider allocating an additional $5K–$15K beyond what you believe you’ll need for your annual health spending. Why? Because when a significant health expense arises, expected or unexpected, you can have peace of mind knowing you have funds in your HSA, enabling you to obtain healthcare in the most tax-efficient way possible.

Practical Examples:

  • Maya’s Story: Maya, a restaurant manager, spends $1,200 out of her $2,000 HSA for the year. She saves the remaining $800 for the next year. When a surprise dental bill comes up, she uses the $800 carryover.
Health Finances
  • Martin’s Story: Martin, a small law firm owner, plans for $5,000 in health spending each year for himself and his family. Instead of creating an HSA for $5,000, he opts for a $15,000 HSA.

    When unexpected health expenses arise, such as metal health services or braces for his kid, he can use his HSA without worrying about reaching his HSA limit. Martin knows that all these expenses will be tax-deductible business expenses, using “pre-tax” business dollars instead of “after-tax” personal dollars. Additionally, Martin knows that all these health benefits will be non-taxable benefits for him and his family.
Health Finances

Using Carryover at Coastal HSA

At Coastal HSA, we believe in this strategy so much that we made it standard for all of our health spending accounts to have a 1-year carryover. Having this carryover means you’re in control of your health spending. If you don’t use the carryover after 1 year, it expires per CRA rules. You’ll then receive a new carryover amount based on the previous calendar year.

Read More: A Journey Through The History Of Health Spending Accounts In Canada

Summary

You can prepare for significant health finances by leveraging the carryover feature or simply adding more to your annual HSA allocation. This way, you’ll be prepared to cover large health Finances in a tax efficient way when they come up. Use your HSA to plan and take charge of your health finances with this smart but simple HSA strategy.

Have any questions about carryovers or HSAs? We’d love to hear from you; send us a message today!

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