As personal tax time closes for the year, now may be the time to start looking at your corporate year end. This could lead you to review your tax structure, and how your personal income is received, ie. T4 or Dividends. If your accountant is like mine, I receive dividends in order to take advantage of lower tax rates.
If you are taking only dividend income, you cannot COST PLUS excessive dental and medical expenses not covered by your employee benefit plan. The CRA will not allow you to expense these items to your corporation if you do not have T4 income in proportion to the expenses you are claiming.
As Cost Plus can be a cost effective form of claiming medical expenses in addition to your group benefit plan, this is something that should be kept in mind.
Working with your group benefit coverage, Cost Plus can:
- Cover items not covered or paid for by your group plan,
- Reimburse these costs on a tax-free basis,
- Be paid with pre-tax dollars through your company, creating a business deduction like group insurance premiums.
- Cost Plus cannot be for shareholders only.
The rules are changing for this tax strategy so be aware.