Tax Treatment of US Healthcare Savings Accounts (HSA)

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moderate_mustachian
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Joined: Sat May 12, 2018 10:30 pm

Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by moderate_mustachian » Sat May 12, 2018 10:34 pm

I can't seem to find a clear and recent answer about Canadian tax treatment of US HSA (healthcare savings accounts). Should one try to spend down this money before returning / moving-to Canada, or can it grow tax-free much like an IRA? I've got a significant amount saved in my HSA.

Anecdotal information seems to imply it is okay to leave it as-is, but I've also got concerns about cross border compliance issues with the HSA holder (the same way many US brokerages will freeze / force liquidation of accounts if investor moves overseas).

Thoughts or advice?

nelsona
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Post by nelsona » Sun May 13, 2018 2:37 pm

You can keep the HSA, and use it like you were while in US, on eligible expenses. If you use it on ineligible expenses, the withdrawals will be taxable in Canada and US. Of course, you may not have many medical expenses in Canada, but you can use the funds for any that you do incur. They are protected by the treaty, as "benefit" accounts.


As to keeping your funds with a praticular firm, that should be a concern for ALL you US accounts (401(K), IRA, Roth, etc). You need to get CLEAR indication from the sccount managers that you can keep them after leaving, or find another firm BEFORE you leave US.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

roy123
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Joined: Fri Nov 29, 2019 7:17 am

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by roy123 » Fri Nov 29, 2019 7:18 am

This is very useful.

pl0910001
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Joined: Fri Jun 21, 2019 6:33 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by pl0910001 » Sun Dec 01, 2019 1:37 pm

Hey Nelson, i have a follow up question. I am working in the United States but am still a tax resident of Canada. If I contribute to an HSA, is that money tax deductible in Canada for the year in which it is earned? If so, do i claim it as a medical expense?
Thanks

nelsona
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Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by nelsona » Sun Dec 01, 2019 10:53 pm

It is deductible, but simply by not including it your wage income (just as it is not included in US). When you incur medical expenses which you pay with HSA, those expenses can be claimed in Canada.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

pl0910001
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Joined: Fri Jun 21, 2019 6:33 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by pl0910001 » Sun Dec 01, 2019 10:58 pm

So if i read that right, any income placed into a HSA will not show up on my W2?

nelsona
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Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by nelsona » Sun Dec 01, 2019 11:01 pm

It will not show up in your wage box ; it will be a coded amount on your W-2, like your 401(k) etc. CRA has never said to add that amount back into your wages (unlike 401(k)).
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

pl0910001
Posts: 6
Joined: Fri Jun 21, 2019 6:33 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by pl0910001 » Sun Dec 01, 2019 11:08 pm

Thanks for the follow-up. Much appreciated

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