At myHSA, we often get asked: Can employees top up their Health Spending Account (HSA) with payroll deductions or personal contributions? The short answer is that while the CRA doesn't say "no" to that, we won't do it. Here's why:
According to the Canada Revenue Agency (CRA), there’s generally no tax advantage for employees who contribute their own money to a Health Spending Account. In fact, doing so may result in higher taxes and less value overall.
1. Your Salary Gets Taxed Either Way
If an employee chooses to contribute to an HSA using payroll deductions, they’re still taxed on the full amount of their salary, including the portion they "give up" for the HSA. This means the income is taxed before it’s used for benefits, even though the funds are going to health expenses.
So instead of getting a tax-free health benefit (like when an employer contributes to your HSA), the employee ends up paying taxes on money they’re not really taking home. That’s not a win.
2. Medical Expense Tax Credit (METC) Might Not Help
Technically, if you contribute to an HSA that qualifies as a Private Health Services Plan (PHSP), you can try to claim the amount under the Medical Expense Tax Credit (METC). But there’s a catch: the credit only offsets a portion of the tax paid on that income, and it’s non-refundable. So if you don’t owe much in taxes, it might not benefit you at all.
Plus, the process is more complex than just submitting a claim to your employer-funded HSA.
3. There’s No Refund for Unused Balances
Here’s another kicker—if you contribute your own money to an HSA and don’t use it, you can’t get it back. There’s no mechanism under the CRA’s rules to refund unused employee contributions at year-end. So if you over-contribute or don’t use the funds in time, they’re simply forfeited.
Here is what the CRA says:
So, What’s the Better Option?
Let your employer fund the HSA on your behalf. When an employer contributes, it’s a non-taxable benefit for you and offers full value for medical expenses.
At myHSA, we structure our plans to follow CRA rules carefully to ensure you get the most from your benefits. That’s why we don't recommend employees contribute to their own HSA —because it protects them from unnecessary taxes and lost funds.
Questions? Reach out to Support@getmyhsa.com