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 have two main HSA strategies for managing personal health finances: the carryover approach or increasing you annual health wallet amount. At Coastal HSA, the carryover method is standard—letting you roll over unused funds each year to create a self-insurance buffer for larger medical expenses. Alternatively, if you have the flexibility to adjust your HSA contributions, consider allocating an extra $5,000–$10,000 beyond your expected annual health expenses. Why? This additional allocation ensures you’re financially prepared for both expected and unexpected healthcare costs, while also allowing you to maximize the tax efficiency of your HSA.

Practical Health Finance Example:

Martin’s Story: Martin, the owner of a small law firm, budgets $5,000 annually for health expenses for himself and his family. However, instead of limiting his HSA to $5,000, he sets it up for $10,000. By doing so, Martin combines the best elements of a comprehensive health plan: it provides full coverage when needed but doesn’t cost extra when it’s not.

When unexpected expenses arise—like mental health services or braces for his child—Martin can tap into his HSA without worrying about hitting a limit. Plus, he knows these costs are tax-deductible business expenses, paid with “pre-tax” business dollars instead of “after-tax” personal income. Martin also appreciates that these health benefits are entirely non-taxable for him and his family, giving him peace of mind and significant tax savings.

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 plan. 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.

Summary

Prepare for major healthcare expenses by utilizing the carryover feature or increasing your annual HSA contributions. This approach ensures you’re ready to handle large medical costs in a tax-efficient manner, a strategy embraced by hundreds of thousands of Canadians. Take control of your health finances today by creating an HSA plan that’s both smart and straightforward.

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