Let's talk about health-care costs. Surveys used to show that taxes used to be small business owners' biggest concern. Now it's rising health care costs. If you pay for your own health insurance, you can deduct it as an "adjustment to income" on Page 1 of Form 1040. If you itemize deductions, you can deduct unreimbursed medical and dental expenses on Schedule A, if they total more than 10% of your adjusted gross income. But most of us don't spend that much on healthcare, so we don't get full deductions for what we spend. What if there were a way to write off medical bills as business expenses?
There is, and it's called a Section 105 plan, or Medical Expense Reimbursement Plan. If you qualify, you can write off just about any legitimate medical expense. Health insurance, longterm care coverage, Medicare, and "Medigap" insurance. Co-pays, deductibles, and prescriptions. Dental, vision, and chiropractic care. Big-ticket expenses like braces for your kids' teeth, fertility treatments, and LASIK surgery. Even nonprescription medications and medical supplies, like aspirin and cold remedies. The best part is, this is money you'd spend anyway, whether you get a deduction or not. You're just moving it from a nondeductible place on your return, to a deductible place. You'll save income tax on whatever you deduct. You may even save self-employment tax too. 5 If a Section 105 plan won't work, we can discuss Health Savings Accounts. These arrangements combine a high-deductible health plan with a tax-free savings account to cover unreimbursed costs. They give you much the same benefit as the 105 plan, without quite the flexibility.
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