PRIVATE HEALTH SERVICE PLANS FOR THE SELF-EMPLOYED & SMALL BUSINESS OWNER

One of the advantages to working for a big corporation, used to be the medical and dental benefits that were offered.   Well, a new legislation has changed all of that for self-employed and small business owners.  This new legislation allows Self-Employed Individuals and Small Business Owners to deduct a wide range of their medical, dental and prescriptions as a valid business expense. 

In order to deduct premiums paid or payable to a private health service plan (PHSP) you must meet the following conditions:

• your net income from self-employment (excluding losses and PHSP deductions) for the current or previous year is more than 50% of your total income,* or

your income from sources other than self-employment** is $10,000 or less for the current or previous year;

• you are actively engaged in your business on a regular and continuous basis, individually or as a partner; and

• the premiums are paid or payable to insure yourself, your spouse or common-law partner, or any member of your household.

You cannot claim a deduction for PHSP premiums if another person deducted the amount, or if you or anyone else claimed the premiums as a medical expense. For your premiums to be deductible, your PHSP coverage has to be paid or payable under a contract with one of the following:

• an insurance company;

• a trust company;

• a person or partnership in the business of administering PHSPs;

• a tax-exempt trade union of which you or the majority of your employees are members; or

• a tax-exempt business organization or tax-exempt professional organization of which you are a member.

If you have any questions on whether your situation can benefit from a PHSP, please feel free to contact us.