7 Ways to Save on Health Care Costs

Hi, Mark Kohler here, CPA attorney, talking to you today about health care. Now, some of you may be thinking, why am I talking to a tax guy, a lawyer, about health care? Well, it's because in our law firm and accounting firm, we're helping clients all over the country try to save on health care when they're doing their legal and tax planning. This topic is not about how to negotiate with your doctor or how to save a few bucks at the pharmacy. This is about saving on a variety of health care costs. Business owner, getting the right type of plan, deducting your health care expenses and making a better decision. So on your tax return, you save some money and your business saves money on the dollars going out for health care. Let's break it down. I said seven ways. Let's start with number one, save on the ACA taxes. That's the Affordable act taxes. Some people call it Obamacare taxes. Even though we don't get a penalty anymore if we don't buy insurance, we still have these two types of taxes that play into it, the net investment tax and the increased Medicare tax. One is built to impact those that may be living on more passive income or business income and those that have a big salary or day job. The government's trying to raise money to help pay for subsidizing these 40 million Americans that now get health insurance. That's okay. I'm not trying to get political. It's a tax. And if you make more than 200 grand single or 250 grand married, you may be paying this tax. So the first step in saving money is to identify if you're subject to this tax. S corp income is not subject to the tax. Retirement income is not subject to the tax. If you sell property and are a real estate professional, you don't pay the tax. You could use a charitable remainder trust to get around the tax. You might do an installment sale. When you sell property tax, keep your income lower so you don't pay the tax. Your accountant should be talking to you about ways to keep you under the threshold so you don't pay the tax or adjusting your salary appropriately. If you're a small business owner with your S corporation, there's ways around this. And if you're not talking about it, you're not saving. Number two, choosing the right type of health insurance now. Oh my gosh. This is a huge topic. I've got a chapter on this in my book, the Tax and Legal Playbook, second edition. The game has changed and I've got all sorts of podcasts on this and other articles. This is a big one. But let me give a few suggestions. First consider are you healthy or unhealthy? Do you need a high deductible plan or a low deductible plan? Could you do a health care sharing ministry where the contributions or premiums are a lot less? You may not get a tax write off, but you're saving a lot more than paying huge premiums. And then look at your network. A lot of health insurance plans are more expensive when you get a broader network or a network or a hospital that's closer to you. That's why you've got to really dive into it. And I know it's miserable. It's worse than shopping for a new car or going and buying a new cell phone and being at the store or the car dealership for hours. But you've got to spend a little time looking at what's best for you or your family and the type of plan that could save you money before we even talk about making it tax deductible. Number three, deduct your health insurance premiums. Now if you work for the man and you have a day job or corporate job and your health insurance is provided for you and you get to select the most coolest premium out there, that that's fine, but maybe many of you watching don't have that luxury. And so you've got to choose the right plan and then you're going to be paying for it out of your business or out of pocket or a portion thereof. That's why I want you to have a small business on the side. Health Insurance premiums are 100% deductible in an ordinary income business. Again, if you're not getting a write off for this, talk to your accountant. What type of small business do you have on the side and can we pay for your premiums out of that? Boom. Now we're talking write off number four, the small business health care tax credit. Now if you have employees and you're going to pay for some of their health insurance and there's some qualifications, do you have less than 25 employees and is the average pay less than 50,000 per year per employee? There are some qualifications, but this is a dollar for dollar tax credit. You get on your tax return up to 50% of whatever you paid for for your employees to have health insurance. So think about it, if you paid $10,000 in premiums for your employees, you get a $5,000 tax credit against any other taxes you may owe. That's a Big deal. And it's a perk you may need to offer to attract better employees. So if you're going down that path again, make sure your tax professional knows if you're paying for this insurance and if you can qualify for the tax credit. Okay, we're going to go to the whiteboard for 5, 6 and 7. It's the easiest way to explain this. Now, I'm talking about deducting your medical expenses, not your insurance premiums. I'm talking about copays, deductibles, dental, eyes, massages, physical therapy, acupuncture, over the prescription drugs. Did I say that? Anyway, it's a big list, right? So I want you to deduct all those expenses. Now, some of you are like, well, I'll just put it on my tax return. Now, some of you have already faced this, right? It's called the itemized deductions or Schedule A. It sucks. It's terrible. 97% of Americans that try to deduct their medical expenses as an itemized deduction never get to do it. It's terrible. And under the increased standard deductions, even more Americans are not itemizing. So I don't want you to think about Schedule A. That's not what I'm talking about. That's terrible. I, I've got three ways, and this is five, six, and seven. Five, six and seven are three different strategies that I write a lot about. And you can catch them on other YouTube videos, my blog, and get to my website and even my podcast for more deeper discussions about this. The three the flexible spending account, the health savings account, and the HRA or health reimbursement arrangement. Now, I've literally shot three hour videos that take into account these three topics. Is my tax and legal library on my website. Man, it will save you thousands. But I want to expose you to this because you want to be thinking about these three strategies and if you're taking advantage of one of them, all my clients use one of these or all three. You can, you can use all three. Now, the flexible spending account is the use it or use it plan. That's the one where at your company they're going to give you a couple ousand dollars or 3500, it's adjusted for inflation every year. You can look up what the rules are for the, the year you're watching this video. But the flexible spending account is given to you by a big company. You turn in your receipts, it comes off your paycheck and you don't pay taxes. And this is great. It's kind of a reimbursement plan, flexible spending account. And you don't pay taxes up to a certain amount, but you use it or lose it and it carries forward a little bit into the upcoming year, but then it's gone. So I don't use this for small business owners. I don't use this at all myself because I don't have a big company giving me a flexible spending account. But if you have it, use it, just don't lose it. Now the hsa, my favorite of these three. I know man. I love the HRA too. The health savings account is like a supercharged ira. You get tax deductions to put the money in. You get tax free income to pull it out at any age. You don't have to wait till you're 59 and a half. You can do it when you're 21 years old and you can invest it tax free, even self direct it. You can buy a rental property in your health savings account and all the rental income pay for your health care tax free. I have a health savings account that owns an LLC that owns a rental property. I've had it in there at least eight years. All the income from that rental property pays for health care. I don't even file a tax return. What? That's a hundred percent owned LLC by my health savings account. So you get tax deductions to put in the money. It grows tax free and it comes out tax free. Any medical expense. This is a big deal. Now study it because you've got to make sure you qualify for an HSA by having a higher deductible health care plan. That's why way back at step two, I was talking about choosing the right type of health care plan because you want to go into it looking at the big picture. But I love these. Study them up. I really use these mostly for my healthy clients. Now the HRA is the health reimbursement arrangement. Now I love this one because you can take a tax write off for all of those out of pocket medical expenses if you have a lot of them. See this is, let's put it in perspective. This is the use it or lose it. And then the HSA is like a supercharged ira. So I'm even going to put that supercharged IRA just for health care expenses. And then the HRA is a reimbursement plan. You have to have a small business to do this one. You don't have to have a small business to do an hsa. You just have to have the right type of insurance. But the HRA is a reimbursement arrangement you implement and whether you're single or married, it's going to look differently. And depending on what type of business you have, we're going to structure it differently. We charge usually 4 or 500 bucks to design it, set it up, hand it to you. You self administrate. You don't have to have health insurance to do this. Now where this plays out is I have clients that may have 10, 20, $30,000 in medical expenses. They tapped out the HSA, they tapped out the flexible spending account and they got a lot of medical expenses. I've had this with clients that have children with autism or learning disabilities and they've got a lot of qualifying medical expenses to help them. I've also had clients young or old that have had to go into rehab. Rehab is a medical expense. Your business can pay for that or reimburse it through your family. Now I'm getting a tax deduction for tens to twenties to thirty thousands of dollars for cancer, maybe a kidney transplant that I had to come out of pocket for some portion of that. Or again rehab. So lots of medical expenses. You want to study up on what qualifies and this is where talking with your tax professional really matters. Summary Hopefully I just got you excited to learn a bit more about deducting your medical expenses properly and structuring your medical properly in your business structure, your tax structure, your asset protection structure. This is what we do at our law firm. We bring it together in just a couple hours of meetings a year. You should be having that regular meeting with your tax and legal professional. It's this. Not just pounding it out on TurboTax and LegalZoom and Planner that knows this stuff can change your life. This could mean the difference in making a car payment or a house payment and saving in medical. So study it up. Maybe you don't like me or my firms or what we're doing, that's cool. But study up on it. My books, my videos, my podcasts, my articles will help you get educated enough to make an informed decision. Yes, there are ways to save on health care costs. Study it up and keep living that American dream. Thanks so much for watching that video and I want to be your source for tax and legal strategies. It's hard enough to live the American dream without being out on the web, on Google trying to find answers to complex questions and just clicking a mouse hoping you got it right. My team and I want to be a huge resource to you, the law firm accounting firm my education resources on my site. Please continue to follow these strategies. I know they'll save you thousands. Now click here if you want to be a part of my newsletter. It's awesome. Weekly updates and deadlines and strategies and tips. Also, subscribe to my YouTube channel. You'll love it. And make sure to click the bell icon so you get a little ping whenever there's a new video. And finally, check out my site marcjkuller.com with all sorts of videos, probably 70 plus videos, 30 plus hours of content that'll save you thousands of.