Choice 1 Out of Pocket:
After Tax Medical Expense
The medical expense is paid for by you, personally, with out of pocket after tax dollars. After tax dollar is the amount remaining after
personal income tax is paid. In this example’s tax rate, your company would need to pay you $1,780 (before tax). 43% would be paid in
income tax ($780).
This would leave you with $1,000 (after tax) to cover the cost of your medical expense.
Choice 2 HSA:
Before Tax Medical Expense
On this side, the medical expense is paid through your corporation as a before tax business expense. Effectively, you are able to write off 100% of your medical expense through your corporation. Value is created by keeping the additional 43% tax inside your corporation.
The annual fee in this example is only paid once per year. On your next claim there would be no administration fee, thus increaseing your savings.