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Can you put money into an account that is just for medical expenses every month (prepaid) in case you need it for future use?
Expert: Julie King
Judy asked:
Can you put money into an account that is just for medical expenses every month (prepaid) in case you need it for future use? I thought I heard that there is a tax break for doing this.
Julie King answered:
Businesses can set-up health savings accounts, which provides a way for the business to pay 100% of valid medical expenses for the owners and employees.
We have an in-depth article on this topic, that I wrote, An In-Depth Guide to Personal Health Spending Plans (PHSPs).
As you will see when you read the article, there are two main kinds of accounts. With the first type of account, you put a set amount of money into your account each month and then submit a claim for valid healthcare expenses. The second type of account does not require that you set money aside in advance, but instead lets you 'pay-as-you-go' so that you submit your claim with a cheque to cover the amount.
The tax benefit is that these plans allow the business to pay 100% of qualifying health care expenses, which the company then claims as an expense against income.
I hope that helps!
Julie King
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