As a Self Employed person, you have an added advantage when purchasing an Individual Health Insurance plan.
Your premiums will be tax deductible as a business expense.
And that means that you will save a huge amount on health and dentals bills.
What it costs with No Health Plan
If you incur the exact same medical bills, say $1500 of medical dental bills and you don’t have a plan, assuming you are in the 40% marginal tax rate, then you will actually have to earn $2500 to pay for those bills. Even adding medical expenses to your personal tax return, for lower amounts is not available, as they must exceed the minimum threshold of 3% of your income or $2171 (current at time of this post).
Therefore – your cost of $1500 medical expenses will be $2500 in before tax income.
What it costs with an Individual Health Plan
For the exact same $1500 of medical bills, and making the following assumptions
– that you are reimbursed 70% by the insurer, and you are in the 40% marginal tax rate, you will only have to earn $1350 to pay for the same medical bills.
And this is including the cost of the premium for a basic plan.
So No Health Plan – $2500 Cost to you
With an Individual Health Plan – $1350 Cost to you (including premiums).
That is a cost savings of $1150.
It makes sense to have an individual plan – because of the cost savings to you, and also for the peace of mind knowing you are covered.
Do you qualify as self employed?
If you are self-employed under CRA’s criteria, you can deduct the Health and Dental premiums you pay as tax deductible business expenses on your income tax return – up to $1500/year/person.
There are limits and rules. Visit my Individual Health Insurance Taxation Page for a brief outline of the rules.
And remember to check with your accountant that you qualify as self-employed, and into which category of limits would apply to you.
If you would like information on Individual Health & Dental Insurance plans – visit here.