Self Employed – The Cost Advantage of Having a Health Insurance Plan

Cost Advantage of Having a Health Insurance Plan

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.

For Example:

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.

Cost Advantage of Having a Health Insurance Plan

 

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 plansvisit here.

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