Private Health Spending Plans can be setup for sole-proprietorships to provide health and dental coverage to self employed individuals. The plan is set up and funded with pre-tax dollars. For tax purposes, unincorporated businesses have the following maximums based on family size: • $1,500 Per adult • $1,500 Per Dependent over 18 years old • $750 Per Dependent under 18 years old What is the tax advantage to opening a Health Spending Plan? Without an HSP your medical and health expenses are never tax deductible on personal taxes, they are only eligible for a tax credit. If your medical expenses in any given year exceed 3% of your total taxable income, a tax credit is available. A tax credit is paid out at the lowest tax bracket level. If your medical claims are less than 3% of your total taxable income in a year, you get no credit whatsoever. What types of expenses are eligible? Under a PHSP or HSP there is no restriction to usage as many insurance programs do. Below is a sample of allowable expenses.
- Premiums for health plans and travel insurance
- All dental services (including orthodontics, implants, veneering and oral surgery)
- All optical services (including frames, lenses,contact lenses & solution, laser eye surgery)
- CT scans, MRI’s, etc.
- All paramedical services (including chiropractic, massage, physiotherapy, psychiatric)
- All prescription medications
- Services provided by a qualified medical practitioner
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