Donna Genie explains how business owners can use a medical expense reimbursement plan to turn after-tax medical costs into pre-tax deductions. A spousal plan reimburses your spouse for work-related compensation, covering out-of-pocket costs like prescriptions, dental, and glasses, but not insurance premiums. Expenses must be paid in the same year they're reimbursed.
Medical expense reimbursement plans are a great.
Tax strategy for many people in business.
In order to qualify to use a medical expense reimbursement plan, you'll need to have a sole proprietor, partnership or C corporation structure for your business. You'll also need a spouse, unless you.
Plan to do this for your employees who are not related to you.
In order to use this as a spousal plan, the concept is that you'll be taking your after tax medical expenses and converting them to pre tax. You'll be reimbursing your spouse for compensation and working in the business by instead of payroll, reimbursing their medical expenses. There's a written document that you'll use.
As a plan document to justify this.
And to document it and we can help you with that. And then you'll take all of the out of pocket medical expenses that you incur for the year and you'll physically write a check to reimburse your spouse for this. Now these expenses can be for your spouse as well as anyone that is his or her dependent. So that could be for you as the business owner, as well as any children or other family members that you.
May support and show as dependents on your tax return.
Medical expenses include things like out of pocket medical. They do not include health insurance or dental insurance, but they'll also include things like prescriptions, dental and eye coverage. So eye coverage, again remember, includes glasses, contact lenses, contact lens solutions, and then of course you've got your dental out.
Of pocket medical expenses like co pays or paying a hospital or a medical provider.
In looking at the timing of those expenses, they have to have been paid in that current year that you're reimbursing for. So even if a procedure was from a prior year and you were issuing.
Payment in the current year, that would be reimbursed in the current year.
Also remember that swiping a credit card counts as the payment time. So if you are using a special medical expense credit card for certain procedures, that is the date when you make.
That charge will be the date when that expense is considered paid, not when you pay off the credit card.
All right, so let's get busy and set these plans up again. Make sure that that check clears before the end of the year. And if you have any questions about how a medical expense reimbursement plan works, please let me know. Thank you.
