If you’re wondering whether a holding company can qualify for a Health Spending Account (HSA), the short answer is no.
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Here’s why: Only active, operating companies with employees who are earning income for their work are eligible to establish an HSA - that's because it must operate just like insurance. Holding companies—those that generate passive income or exist solely to hold assets or investments—do not meet the eligibility criteria. An HSA is specifically designed for operating companies that employ active employees, ensuring it supports those who are actively contributing to the business.
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If you have an operating company with active employees, an HSA can be a valuable tool to offer tax-free health benefits. But for holding companies or entities structured primarily for passive income, alternative benefit strategies would be required.
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If you have questions about this, or need further advice, it's best to reach out to the CRA who outlines the rules regarding spending accounts!