Taxes and Tax Deductions
Canada is a high tax jurisdiction. We expect necessary services in the area of education, healthcare, infrastructure and protection. These expectations have a cost. Each year the Fraser Institute in Canada proclaims “Tax Freedom Day.”Tax Freedom Day is defined as “an easy to understand estimate of the total tax burden paid by Canadian families to the provincial, local, and federal governments. In 2012, the average Canadian family must earn just under $95,000 and pay a total of approximately $42,000 in taxes, for a total tax bill of just under 45% of income.”
Most Canadians are aware of major tax bills such as income tax and provincial sales tax and local municipal taxes. However, there are also a myriad of hidden taxes, such as those multiple taxes on gasoline and taxes on alcohol. The taxes don’t even account for the multitude of fees that are now charged for necessary services by all levels of government. These include car registration fees, increases in passport fees and the like.
Tax Freedom Day for the average Canadian family is June 11, 2012. This is the day when the average family starts working for themselves,after paying for government services. That’s why every small business owner must be aware of all legitimate tax deductions. Tax deductions are business expenses necessary to earn income. Legitimate business expenses can be deducted from income, and significantly reduce taxes payable.
The Most Overlooked Tax Deduction for Small Business in Canada
This is a deduction for personal expenses for the small business owner and his family, which can be written off as a business expense.This is an account,a Registered Health Spending Account, which allows you to take money out of your company tax-free to pay all healthcare expenses for you and your family.
This is not a loophole. This is not a grey tax area.
It’s hard to believe, but the average family of four in Canada, spends $2-$3000 per year on health care expenses. These expenses include the cost of prescription drugs, routine dental checkups and care, prescription eyeglasses and the cost of chiropractic, physiotherapy or massage therapy.
Many families have additional costs such as dental braces for their children, laser eye surgery, fertility treatment, dental implants, crowns and bridges and many other common but expensive healthcare needs. Many families are fortunate to have a traditional insured health care plan through their workplace. Unfortunately these Plans are designed to create significant after-tax costs for employees through the use of co-payments, and deductibles and the many excluded, but expensive items.
Registered Health Spending Account makes all allowable medical expenses, including expensive benefits such as braces and dental implants, tax-free, saving hundreds and thousands of dollars in payroll and income taxes.
How does this Tax Deduction Work.