The US Tax Code can be pretty rough on the self employed. It often seems to be written to favor big corporations over small and solo businesses. The rules are often complex and confusing for the average self employed individual to grasp, even with the help of an accountant. And that first paycheck can be a shock when you realize how much of it is eaten up by self employment taxes!
Even when tax breaks are available, figuring out if you qualify and then having all the right paperwork in place may make those deductions seem like they aren’t worth the hassle! For instance, if you have a home business, i.e. you work out of your house, you may be able to deduct for a ” home office” — but the requirements are strict, and can be a trigger for an unwelcome audit. Mileage reimbursement is a little more straightforward, until you realize you have to write down every trip, its’ length, who you met with and what you talked about! And not many new business owners even remember to keep track of startup expenses, much less understand how depreciation works, without the help of a good accountant.
There is one tax provision, however, that is clearly worth the trouble: a Section 105 Medical Reimbursement Plan. This can save you, quite literally, thousands of dollars a year. You must be married and able to legitimately employ your spouse at least part-time in your business in order to qualify. If you are and you can, read on — your heartburn over outrageous health insurance premiums and skyrocketing medical expenses may be about to go away!
Here’s the bottom line: with the requirements met and the proper paperwork in place, you can:
- Deduct 100% of your family health insurance premiums
- Deduct 100% uninsured family medical and dental expenses
- Save a huge chunk in federal, state, and self employment taxes!
How do you qualify? You must have a properly documented employment agreement with your spouse, and the work performed and salary must be reasonable. Complete records of the premiums and expenses and their reimbursement are required. Ugh, more paperwork…but help is on the way!
I’ve been very impressed with the BizPlan/AgriPlan Section 105 Medical Reimbursement Plan, offered by TASC (Total Administrative Services Corporation). Recommended by a colleague (who saves several thousand dollars every year with this plan), I’ve found TASC to be a very professional company that takes its obligations to its self employed customers very seriously, including offering a tax audit guarantee. And the annual cost is very reasonable, starting at under $200.
Don’t wait — you can only deduct expenses that occur in or after the month you apply for the plan. Consult your accountant, and check out BizPlan today, for maximum tax savings this year!