HSA Tax Savings: How Much Can Your Canadian Business Save?

By Frontier Team•February 10, 2026•3 min read

A Health Spending Account can save your Canadian business 30-45% compared to paying for health expenses out of pocket. The reason is simple: an HSA turns after-tax personal spending into pre-tax business deductions. Every dollar your corporation puts toward eligible medical expenses is fully deductible, and your team receives the benefit completely tax-free. Here is what that looks like in real dollars.

The Basic Math

Say you need $1,000 in dental work. If you pay for it personally, you first need to earn that money as salary or dividends. After federal and provincial taxes, you actually need $1,500 to $1,800 in pre-tax income just to have $1,000 left over to pay the dentist.

Through an HSA, your corporation pays the $1,000 directly plus a small admin fee. The full amount is tax-deductible for the business, and you receive it tax-free. That is $500 to $800 saved on a single expense.

Example 1: Solo Incorporated Professional

You run your own corporation and set an HSA budget of $200 per month. That is $2,400 per year in health coverage for things like dental, prescriptions, glasses, massage, and physiotherapy.

  • Without an HSA: You would need roughly $3,200 to $3,500 in pre-tax income to cover $2,400 in expenses personally
  • With an HSA: Your corporation deducts the full $2,400
  • Your tax savings: Approximately $800 to $1,100 per year
  • Frontier Health cost: $120/year + 8% per claim

That is real money back in your pocket every single year.

Example 2: Small Business With One Employee

You have one employee and you both get $150 per month in HSA coverage. That is $3,600 per year total.

  • Without an HSA: Covering those expenses through salary would cost the business roughly $4,800 to $5,200 after payroll taxes
  • With an HSA: Your corporation deducts the full $3,600
  • Your tax savings: Approximately $1,200 to $1,600 per year
  • Frontier Health cost: $450/year + 5% per claim

HSA vs Giving a Salary Increase

Some business owners think about just giving employees a raise to cover health costs. But the math does not work in your favour.

To give an employee $2,400 worth of health spending power through a salary increase, the actual cost to your business is roughly $3,200 to $3,400 once you factor in CPP contributions, EI premiums, and workers' compensation. And the employee still pays income tax on that raise, so they end up with less than $2,400.

With an HSA, you spend exactly $2,400 plus a small admin fee. The employee receives the full $2,400 tax-free. It costs you less and gives them more.

See Your Exact Savings

Every business is different. Your savings depend on your province, income level, and how much you spend on health expenses each year. Try our free HSA savings calculator to see your exact numbers in under a minute.

Get Started With Frontier Health

Frontier Health makes it easy to set up and manage your Health Spending Account. No setup fees, no long-term contracts, and reimbursements within 48 hours. Just a simple, tax-smart way to cover health expenses for you and your team.

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