Game Changing Healthcare Strategies

Foreign. Welcome, everybody, to this week's episode of the Main Street Business podcast. Excited to be here with you. My name is Mark Kohler, cpa, attorney, entrepreneur,

heck of a good guy.

Whatever. Heck of a good guy. And I'm here with my. Yes, Scout Masters. What you said back in the middle.

That too. But podcaster.

Oh, podcaster. Yeah, that too. And I'm here with the amazing. That voice you're hearing is the amazing Matt Sorenson. Also an attorney, tax attorney, president of Directed IRA Trust company and just a cyclist. Used to call him a biker, but he's like, I don't have a Harley. I have a cycle bicycle.

This is true.

Bicycle. Yeah. Yeah. And lives in Arizona. I'm coming to you out of Salt Lake today. We broadcast from different locations each week. Sometimes as we're out and about, this is a busy time of year. We got a lot of workshops coming up this fall. But excited to be here with you, Matt. Welcome now.

Thank you. And to those who may be new to the show, this show is all about saving on taxes, building wealth, protecting your assets, getting your life in order financially. That's what we're really all about here. So. And we're just going to be right in that line talking about one big expense many of us have want to get a tax deduction for, and that's health care. It is healthcare. Huge. How much money is spent on healthcare? We all spend it. Whether you're going to the dentist, the chiropractor, the therapist, the surgeon. I don't mean, I don't. You know, there's a lot going out in medical and we want to do an efficient way and get some tax deductions for it.

Yeah. Drug rehab. Yeah. Plastic surgery. I mean, all those, you know, the fringe. The fringe write offs, you know, those little. Yeah, those little goodies.

Yeah. So stay tuned to see how you can write off some of these things. I was gonna make a joke there. I kind of refrained. I was gonna make a joke about implants or something. And I thought, you know, we don't want an E rating on another episode of the Main street business podcast. I'm just gonna.

Yeah, no, we were thinking of implants in your ear for hearing. There you go. You know, the cochlear implants, those are bigger. That's what I thought you were talking about. I don't know what you were talking about. So before we jump into the healthcare expense realm and we're going to talk about health insurance, dental, chiropractic, all the above, everything Matt just rattled off It's a huge cost in everybody's life. Whether you're a small business owner, an investor in real estate, which we call you, a small business owner in training. Lots of good write offs there too. We're going to hit it all. Just ways that you can take advantage of these write offs, even those of

you that just have a day job and no side hustle even. There's still some things you can do.

All right.

There's still some strategies and things you can do. So I know a lot of our tax strategies we talk about are like awesome for business owners, real estate investors. But there's some healthcare strategies and you can use even if you don't have a small business. You don't even have a rental property. There's some ways to be smart on your healthcare to get some tax benefits.

Yeah. Now, just a couple housekeeping items first. Many of you may know already that this is simulcast on YouTube. So if you'd like to see our faces and you're doing a little YouTube watching at night and you'd prefer that sometimes we have a whiteboard and we'll let you know so that you can make a note to watch the video of this podcast. But we're on all your podcast platforms. We ask if you enjoy this, please share it. Give a five star review when you feel so inclined. It helps everybody else find the show and we really appreciate it. We put a lot of work into this. And next, we have got a number of events coming up this fall and so we need to start planting that seed. They're live now on the website. A lot of times this, I consider it kind of the workshop season. You know, everybody's getting back to school. You know, it's got back to school fall feeling. College football's in the air and you're thinking, hey, do I need some continuing education before year end? What am I doing? My kids, my grandkids, my family members might be headed off to college. You see school buses driving around, don't get that feeling, Matt. I do. I don't.

Yeah, I mean, it's back to school. We need to learn too, you know, the adults. Just because you're sending your kids off doesn't mean you're off the hook. You need to go back to school too. Always be learning.

Yeah, always. And, and I think that's a theme we've tried to emphasize over the years. But a lot of small business owners think I'm a small business owner now. I don't have to worry about school or all this. Oh, yeah, you can join the school of hard knocks. Trust me, that's worse. Or you can attend a workshop once a while. But Matt and I try to make our workshops very affordable. So let me just give you a few ideas. First, my business owner's workshop is now a two day event. I have a basic in advance. They roll right into each other on a Friday or Saturday. As you get on the website you'll be able to see events in Chicago, Seattle and. Oh no, no, I couldn't do Seattle because we have conflicts. So I'm doing Chicago, Orange County, Hawaii and Dallas. Dallas one day. That's right. And then I'm doing a virtual in where we'll be broadcasting so you don't have to travel if that is inconvenient. This whole new Delta variance mask thing I'm just on. Let's not even bring it up. Well yeah, it's just a hot topic.

Kill the vibe on the podcast today.

Kill the vibe. We don't want to kill the vibe but if some of you are able to travel, it's always fun to be face to face. So go to the website, check out those dates and you'll see them right there. And I try to make them really affordable. Discount if you go to both days. And also I'm doing some young adult financial training classes that are in the evening. I'm doing three locations and that's a three hour evening. It's great for kids anywhere from age 15 to 25. Just kind of young adult age. How to start a small business while you're at college. We're going to talk about your first credit cards, building a million dollar Roth. It's going to be a really great event. You'll see more promotion on that. That's going to be also in Dallas, Chicago and Honolulu. And that's if you want to take a little family write off trip. Come over to Hawaii for the two day workshop and the family training on finances. Finances bring the kids. You could write off the bulk of that trip. So that, that's going to be good. Then Matt, we've got our self directing training. What are you describing? Yeah, yeah.

Go to sdirasummit.com sdirasummit.com and that is October 22nd and 23rd here in Scottsdale, Arizona. There's a golf tournament. It's part of that with some charity components of it. Then a full day of training. We'll have multiple classes going at the same time. So bounce over to stuff. You may be interested more than another one great networking opportunity. You know, we're Gonna have the whole band there. You know, the whole band's gonna be there. A lot of attorneys from the law firm will be there. Mark and I, of course some of our leadership team at directed IRA as well some of our board members and other successful investors that have, that have built significant accounts are gonna share some of the strategies and things they've done too.

Yeah. And that there's gonna be, that's not gonna be broadcast on the web. So if you want to attend the summit, please come. It's in person. Who doesn't like Phoenix in October? Oh, it's amazing.

I mean, yeah, it's late October too. You know, it's, it's like 70s and 80s again. We're throwing golf in the mix. Why not? So it'll be a good time.

And on that note, last point is there'll be two to 300 people there. So lots of networking. You're going to be able to learn from other people that have million dollar Roth IRAs or retirement accounts and really a lot of fun classes. But just quickly, I'll say one example that was fun is we did our virtual broadcast in the spring which is typical. We do it every six months. So the one in the spring is virtual One in the Falls in Phoenix. We'll see how it goes. We're doing some other little evening and one day events for self directed training. But we had a guy come on the virtual summit to learn about setting up Roths for his kids. He's like, I'm going to just tap in, I'm going to pay the couple hundred bucks, whatever. It was very affordable and I'm just going to zoom into this piece. I really want to help my family and get their retirement accounts going. And within 30 minutes he was like hook. And he was like, how did you say man? He came for what? And then he stayed.

Yeah, he said I came for the snacks and I. But then ended up eating the whole Thanksgiving dinner Roth IRAs for my kids and ended up eating the whole Thanksgiving dinner. So we do put a lot of content in these workshops in the summit and in Mark's workshop. So you know, if, if you've liked the podcast in particular, I mean it's even better live and there's other like minded people there. You get the benefit of hearing their questions and, and also just seeing a live format too is, is just different. And so we're looking forward to being back doing those.

Yeah. Okay, so enough said. We'll be giving you more dates. We'll have them down in the show. Notes all the dates of the links to sign up. Corey, would you make sure we do that? Let's make sure we have the dates for each event and the links so people can get signed up. These are tax write off weekends, folks. You can write off your airfare, your travel, your hotel Uber, your mileage to get there if you're driving. And if I don't, Matt and I don't save you. Oh my gosh, 10 times whatever you pay to come. We failed. So this is, this is wealth building. One on one. You're just going to love it. Okay, medical expenses.

Yeah, yeah, this is, this is big because we all spend it. You just can't. It's like I saw a sign the other day, you have a 100% chance of dying. I was like, oh, okay. That's one way to put it.

Positive little. Was that on a fast food restaurant marquee like McDonald's?

Yeah, they were selling life insurance, so.

Oh, that's.

I mean, accurate statement. You also have 100% chance of having a medical bill, like, you know, unavoidable. You're going to get it. But here's the problem. Our tax system has made it. You have to do some maneuvers to deduct all these expenses you pay on health care. If you're just paying it and you're not thinking through and doing it in the right manner, you're not going to get a deduction. A lot of people think, oh, I'm tracking my medical. I take it to my accountant, and then my accountant, I never see it on my taxes. Like it's this miscellaneous itemized deduction that you have to get. Like, I don't know, what is it, 7.5% or something of your AGI in order to get one penny of those deductions. And so that's a really high threshold that 99% of people never meet and they never get to have a deduction or a tax credit or anything for their medical expenses. And so we want to go through the strategies on how you can get that done. How can I get a deduction? How can I get a tax benefit in some way for all the medical I'm incurring?

And I like what you start with. We're just going to do low hanging fruit here. Let's just hit it some base hits, make sure all of us are on the same page. And if some of you are able to take notes, this is really, really helpful. I've got a chapter in the tax and legal playbook dedicated to this. There's even some wealth building strategies related to health care, which is maybe we'll save that as the creme de la creme. Just kind of that last little dessert item. Matt. Okay, you're the reveal at the end.

Okay. All right.

I love that. Let's Make a deal. Yeah, let's make a deal. You're going to open that last briefcase and just.

Okay, what was that show? I forgot about that show. They do the briefcase thing.

Yeah. Anyways, it's fun. Okay, so here's the first point Matt made that I think we need to tell everybody and a lot of young people that are just now getting into the tax system because they're like, okay, I'm at rhyme out of college, or I'm out of high school and I'm building a business or I'm at college building something on the side. And all of a sudden you're like, what? I got. I got to pay taxes. My parents took care of that or whatever. And it's just kind of this. It's, it's a sad day. I remember the day when my kids, each one of them at different age brackets, different scenarios. It was that day where they looked at me and said, now I know what you do, dad. And the cells, and all of a sudden they pay attention. From that point forward, you know, there's, there's 17 year olds selling books at my table at a workshop and they're just like, oh, this is fun. Taxes. Yeah, taxes are great. My dad makes it fun. Yeah.

Then I became the cool dad helping my kids in college, you know, because then they're like, wait, my friends need help with theirs. Can you help them? You know, I was like, oh, finally it came around, you know?

Yeah, finally I'm the cool dad. Yeah. So here's the first rule that all of you need to realize if you're trying to itemize, and Matt talked about that is it's the itemized versus standard deduction that everybody gets. And if you're trying to itemize tracking all your medical and just throwing it on your 1040 like a Hail Mary, 99% of, in fact, the actual statistics are 97.8% or whatever of Americans can't even itemize their medical expenses. You either phase out or you take the standard. And so it's a joke. And a lot of people that are younger go, whoa, whoa, whoa, I thought I got to write off my medical. Well, you do. But like Matt said, you got to follow some maneuvers, some strategies, and we can blow this out of the world, out of the water. I mean, this is really an exciting world if you get into it.

So, yeah, and I think people do on their own tax return on TurboTax, they're like, it's asking me for my medical. And they're thinking it's going to matter. At the end of the day, they go hit their. They're looking at the bottom end of their taxes. It didn't help them at all. And, and that's because of these issues, you're more likely to take the standard deduction. And even if you do itemize, because you got mortgage interest or other stuff that, or you have good charitable contributions, you know, you're, you're going to phase out or you're not going to meet that seven and a half percent threshold. So it's so, so because of that, you're going to need another strategy. So you got to do a strategy. You got to play the game, so to speak. So you just know the rules. So you know how to win the health care tax game here.

Yeah. And I want to give one example. And then, so first point, everybody don't itemize. If you, If I find a client itemizing, we immediately have a conversation. So a lot of new clients that come into our tax firm, all of our attorneys that are doing a master plan with you, they're going to ask, are you healthy or unhealthy? What are you doing for your medical? All of our attorneys ask that. And you may go, man, my attorney's never asked me that. Well, you don't have a tax attorney. That's part of our plan. That's one of our top 10, top 15. So we've got to talk about medical. So quick story. And this will be brief. 60, 108, 80 seconds. I don't know. Two minutes.

I'll time you.

Tomato, tomato. No, you don't have to. That's okay. That's okay. Okay, so. But I remember this vividly. This was back in the day. This is where once in a while I'd meet clients face to face because we became such a national firm. Because in one little town, you know, whatever, you help everybody in town. And then the next month you're like, oh, I guess better start doing divorces and car accidents. But we started really quickly expanding into multiple states and nationwide because small business owners around America were looking for that solution. But I had this realtor couple come in, stay at home mom three to four kids, and realtor dad. Kind of our typical client, whether they're a plumber, engineer, accountant, doctor, dentist, electrician. Just that great small business quintessential couple. Husband sometimes stay at home, dad sometimes stay at home, Mom. But that was the situation. And I remember his name was Kyle. This was.

It wasn't Phil from Modern Family.

No, no, not Phil.

Okay. Dumpy Dunphy. Yeah.

Yeah. Was it Phil? That would have been good. And Claire, you know, Bill and Claire desk.

She's great.

Remember that? So they came in and sat down, and we started going through all the strategies. And this is. I've learned so much in 10 years as well. But this is at least 10 years ago, and. But the strategy I shared with them is the same today. It's crazy. It's not like anything new. It's just, you need to discover it, and we want you to discover that plutonium today. But I looked at their return, and they were making a couple hundred grand. Things were going well. Now, as Matt said, if you itemize and you make a couple hundred grand, if you have medical expenses, you can't write off anything until after 7 and a half percent of your AGI. So if you have 200,000 of adjusted gross income, you're not writing anything off until after your $15,000 and penny of medical. So if I had 16,000 in medical, I get to write off $1,000. It's $1,000. So it's just the way it works. So I look at their tax return, and lo and behold, the last year, the year before, the year before, at least three years in a row, they had over $20,000 in medical. I was like, oh, my gosh. And they look like pretty healthy people. I was like, what's going on? And the mood became fairly somber. They have an autistic child. And they said, we've got to do special education. It's fairly severe. We're doing physical therapy, speech therapy, and all these different things. And it qualifies as a medical deduction. I said, you're absolutely right, but you're not getting it. You're like, right now, three grand or four grand of this? And they're like, oh, we never noticed that. I just saw the train coming down the tracks. This was not good. And I said, oh, my gosh, you're a small business owner. We could have done a health reimbursement arrangement. Do you have a health savings account? No. You have an hra? No, never even heard of them. And I said, if we do an HRE this year, you're going to be able to write off 100% of those medical expenses. And they're like, yay. And then they were so happy. And then about five seconds later, they said, hold it. Can we go back and do that? I said, no. And then it got worse. They said, you mean for the last three years we could have written off over $75,000 of medical expenses for our autistic child? And I got emotional. I said, yeah. And both of them teared up. It was really a sad meeting because they realized how incompetent their account was. And they also realized that they had been hands off. And they took the, they took the blame, too. They're like, mark, we never asked for a tax strategy meeting. We never really took control of our tax return. And we say this over and over again. You're the captain of your ship. You're the one that freaking signs it. It's your tax return. You should understand the basics of it. And it was really, really sad. But from that point forward, a hundred percent medical write off with the HRA strategy for them. Now that's not for everybody. That's different situations. But that was.

That's an awesome one. That's a good example to start because this is, this can be a big one, the hra. Now let's, let's, let's unpeel this because, you know, we've got the great example here.

Unpeel it. You mean unpack it, Man, Usually that's something. I'd say unpack it.

Yeah, usually I. Yeah, unpack it.

Unpeel it. So we're going to put that peel back on the order.

Yeah, we're going to put the peel back on.

That's. Let's peel this away or let's unpack it. You know, it's been a long day. You ought to see Matt on YouTube. It's not.

You know, I've been sick this week, so. Not Covid. Thank goodness. But I'm a little off. I'm a little off. I got my breakfast here that I still haven't ate as well, so. But I'm trying to power through, so.

Eating. Eating. Okay. Yeah. What do I say? I haven't ate yet. Eaten yet. I'm just saying. I'm just. We're working on grammar in our office. Remember, most of our offices are in the country if we have a. Yeah, I remember. This is so funny. Remember Lacey that used to work for us? Yeah. And it was so awesome. One night I had to go to Walmart after work. And it was like in the evening and I'm headed back home and I'm walking through and I see Lacy and I'm like, I know you had an experience with her too, wasn't it? Was it? I've told this story so many times, I can't remember if it was you or me that bumped into her and she said what she was getting. Was it you?

Yeah. Yes.

Yeah, it is a story. I mean, you bump into her, she's carrying this bag and what did you.

Go ahead. Just getting bullets and milk.

But there's a little draw to it. It's like, hey, how you doing? Good. I'm just getting some bullets and some milk. Like.

Okay. Just the essentials.

Yeah. Yeah. Oh, man. So we not.

Not a medical deduction, those two items. But. Okay, let me. Let's hit. Let's unpack the HRA Health reimbursement arrangement.

Okay. Strategy number one.

Okay. You gotta be careful with me today. I'm gonna get off on a lot of tangents. All right?

Okay.

So.

All right.

The hra. Now this worked for. It was named. Was Kyle not Phil Dunphy. What was his name?

Yeah, it was Kyle.

We can do Phil and Claire if you like. I mean.

Yeah. Okay, let's go with Phil and Claire. Same. Same situation.

Okay. Same situation. It works for Phil because Phil's self employed. Okay. He's a real estate agent. Self employed. So in his business, whether he was a sole proprietorship or maybe his S corp. When you do a family management company there. But the key starts at Am I self employed? He can adopt a health reimbursement arrangement that allows him to as the company to reimburse expenses medical that are incurred by his dependents here. His. Their autistic child. And. And there's no limit on it. Now there's some. There are some limits that have came in since. But for self employed persons, no other employees. Right? There's no.

There's.

You could have 100,000 potentially in a year expensing the whole thing. So that's the basics of it in that there's no limit. I need a plan though. I need this health reimbursement arrangement plan adopted. That's why they can't go back in time because they didn't have the plan created and they can't go amend. But they can fix it moving forward. Get the plan incorporated. Start a reimbursement of the expenses in that year. You're incurring them and now you're. You're taking a deduction at the business return level. It's not even showing up. But you're not itemizing it personally.

Yeah, you can. 100%. Now I have two hours of healthcare strategy training in my tax and legal library. So if you go to markjkuller.com, many of you are already members of the little library. It's lifetime. Once you buy it. And I reshoot videos every year, you get updated. So if you want to go dive deep on the hra, there's a, there's some videos in the library. This is something we cover in our workshops. The two day. It's in the advanced portion and it's a, there's a chapter on health care in my tax and legal playbook. I say all that because some of you are like, tell me more. Well, the problem is we only have this podcast. You could spend an hour on the hra. Let me just reiterate a couple of things. Matt said, say it a different way. Health reimbursement arrangements are not an hsa. It's not a use it or lose it plan. It's a reimbursement plan. You can adopt it for your dependents in your family as part of your business. You can take 100% write off for these medical reimbursement expenses for your dependents who are working in the business. Because if you're a small business owner, we want all your family working in the business anyway. So you're knocking out several birds here with one stone. And this write off is on the business return level or at the schedule C level. Now, whether you're single or married, how much income you have, how much you have in medical expenses, that's going to change the structure of this. We might run it through your llc. We might run it through a little family management support company. You can even use this support company to support your rental properties and take advantage of this. So you're like, well, I'm not a realtor, but I got five rental properties. That's great. You got medical expenses and rental properties. We got a strategy. So we construct this little structure that can be very affordable to allow for significant write offs and you're off to the races. A plan, as Matt said to adopt, we charge around 500 bucks. So very affordable. You re up it every year. And when you do your annual consult to look at your strategy for the upcoming year, you can tell the tax attorney, hey, I want to, I want to update a doc. And we do it at a discount the second or third year because we've already got your doc. But there's changes every year, typically with Joe Biden is fiddling with medical expenses right now with his administrative proposal. So you always want to adjust your plan every year, but that's the hra, it's for small business owners only. If you don't have rentals or small business, you ain't doing an hra. Yeah, that's how I threw in that little grammar from the country.

Is that to make me feel better?

It was intentional. I appreciate it.

You're such a good co host. Okay, so that's health reimbursement arrangement. And if you only have a couple thousand medical a year, it's not worth doing. Typically you want to be maybe four or five grand a medical a year before you start thinking of the health reimbursement arrangement. There's probably some other strategies like the HSA we want you to consider first. So let's talk about the hsa. Actually, this is health savings account, Matt.

Actually, let me propose. Let's stick with business owners for a moment if we could. So, business owners, the HRA is one of your options if you have a lot of expenses. Number two, something you need to catalog for yourself. You can write off 100% of your medical premiums in a small business, even if you don't cover other employees. That was a beautiful. Part of the Tax Cuts and Jobs act is that you can pay for your 100% of your personal insurance premium plans for you and your family in a business and you got tons of other employees. It's okay. So you don't have to cover your employees to write off your own health insurance premiums. So remember, premiums are separate from health care expenses. I don't think we need to explain the difference there. But your health insurance premiums to an insurance company are a write off. Can I add something else, Matt? Yeah.

So I Actually let's. I have one other thing for business owners too, so.

Well, I've got a couple. I got a couple more, so keep going.

I'll have one. Do you want me to throw mine in now?

Yeah, yeah, throw it in. Throw it in the circle. Okay.

Cost sharing. These metaphors are terrible. Yeah, well, I wonder about the cost sharing ministry. So you tell me when you're ready for that because that's a good strategy that I think a lot of business owners have actually gone to. Not from a tax strategy, just from a financial strategy in that it's a more affordable way for many people.

So go ahead. I love it.

Let's say you're a low cost medical person. All right? And you're like man, healthcare, just as a self employed person, is expensive. There's the mandate on it. I don't want to worry about penalties with that. Trump removed the Penalty on it. We'll see. I don't know if it's came back yet with Biden actually haven't paid attention. But if you remember from the Affordable Care Act, Obamacare, if you don't have health insurance, you have to pay a fee. There's a penalty for that. And a lot of cost sharing popped up. Yeah, a lot of cost sharing ministries popped up because of that. As an alternative to say hey, I don't want to go buy these Cadillac insurance policies you have to buy now. I just want a cost sharing ministry that's cheaper and there's these and these are exempt from the Obamacare rules now. So if the penalties ever come back. But under cost sharing ministry you could be paying like 100 bucks a month and you have a cost sharing arrangement. It's not insurance, but it's cost sharing. And these are pools of people who are putting money in. I use this for, for a while. For me, when healthcare in Arizona went through the roof because we had one insurance provider left offering individual plans as a self employed person. It was a joke and so I went to a cost sharing ministry. So but this is a good option. It's cost sharing ministries. Christian healthcare was one of the big ones out there. Dave Ramsey, you know, is always touting that one, but that's one I actually use. And basically it's, it's not insurance. Like I don't get to go to the doctor for free. But if there was ever an expense over $5,000, a one time thing over $5,000, it would cover it and I'd submit that expense. I get it covered now. I never had to use it because I never had one thing over five. But it was a way where I could financially reduce my expense of medical but still have something there if something really went bad, which is kind of what insurance should be in my mind. Like right. Like I think our medical insurance is messed up. I need insurance to like when there's a big thing that I can't cover. I don't need it to go to the doctor to save 50 bucks or 100 bucks on an office visit. I need it for like a $5,000 plus thing. That's when you need insurance. And so that's really what the cost sharing ministries have moved to. So now I don't get a deduction for paying that though even if I'm a business owner, I can't take as a business expense. Okay, these are non deductible but the cost of them, you know, you may have a thousand dollar premium for health insurance and maybe a hundred dollar cost for the cost sharing ministry. So they're a fraction of the cost. So it could be a good solution for those that are healthy, haven't had to use insurance a lot but still want to manage that cost and that spend that you have for healthcare.

Yeah. And I want to throw out a couple other perspectives on this. Remember, everybody's different, every state's different and you don't have to be a member of anybody's church to join it. Anybody can join these little sharing groups. I guess you could be even an atheist and they'll let you in. Very inclusive.

Yeah, there's different ones. So you do actually need to find one that aligns with. Because you actually have to sign off saying that I, you know, I believe in these and stuff.

So yeah, okay. So keep in mind this too. There's a lot of differing perspectives on this. Sometimes people see a 90% savings rate like Matt was paying 1000 premiums. Maybe you got a Christian sharing plan for 100 bucks. I'd say maybe the average might be 2/3 in savings. So if you have a 1500 dollar plan you might get a cost sharing for 500. So there's savings. So you need to compare. Everybody's different. So don't hold us to that. And also these sharing ministry plans can also be different. Some have a lower deductible than a higher deductible. I've had doctors say they use the cost sharing ministry for all the little things and then they have a catastrophic or an aflac type of secondary policy. If I were to get cancer, they've had nightmare experiences where let's say all of a sudden one of your kids got leukemia and it was a $75,000 bill. This cost sharing ministry may go, we tap out at X dollars or we don't cover this or cover that. So you want to really look at the fine print and make sure you have a safety net for the big stuff. So there's different ways to do it. Some people might combine an insurance plan of a, of a more affordable provisions if you will, with a cost sharing ministry so they can get the best of both worlds. But the insurance is a write off. Customer ministry is not. So yeah shot.

I liked it for myself. It was a good option for me because there wasn't a lot of good health insurance options in Arizona at the time. This was very early after Obamacare. But I've since moved back and just do traditional health insurance because now there's more options. I can get better. I can get a higher deductible plan. I actually do an HSA plan now that's a little cheaper and I can throw money in an hsa, which we'll be talking about here in a moment. But the cost sharing administrator, I think is one. A lot of people, in fact, a lot of my friends that are small business owners, that's who told me about it. My auto insurance agent, that's a small business owner is the one who told me about it. You know, insurance guy and a lot of my other small business owner friends have actually gone to that as a way to just keep the cost down. But so consider that option for those that have lower medical. No health care issues you're aware of. And, and it can be there for the catastrophic stuff. But Mark, you're right. There is like, sometimes if it's over 100,000 or 125, they have the ability to cap it if they can't cover it.

So. Yeah. Now here's another thought some of you may be thinking. Well, hold up. Matt said he would pay into this sharing ministry, but he'd go out of pocket for the initial three to five grand. And that was the way to save money. Well, could Matt combine an HRA with a cost sharing ministry? Yes. Now, he could not have the HRA pay for the cost sharing contributions. Again, that's not deductible. That's just kind of a pool. That's five people getting together and say, hey, let's throw money on the table and we'll share in our medical cost. Except there's a few other zeros, not just five people now. But if you want to do an hra, Matt could do an HRA for those. All those little expenses that add up during the year. Dental, chiropractic, eyes, massages. Who knows all the different things that he needs to deal with in his body. I want to reach for my back. Okay, yeah, prescription drugs.

So the massages are, you know, doctor prescribed.

So, yeah, so lots of things. If you go to a massage envy, they'll ask, do you have an HSA or an HRA that you plan on paying with? So, but anyway, so you can use an HRA for any expense. That's not the contribution to the sharing plan. You can still write off premiums to an insurance company and use the hra. Now, see, people, these are the little maneuvers. You're like, oh, my gosh, this is so confusing. It's really not once you get your head around it. Because what I tell people is start with a big whiteboard either you have insurance or a sharing ministry. You know, how are you paying for the future possible catastrophe? So that's insurance or a sharing plan. Then I put a line down the middle and then I say, over here, these are your health care expenses. Now this is where I love Publication 502 of the IRS Code. In it, in this publication gives you a list of all the things you could write off. And it's pretty comprehensive. Now, we joked around at the beginning, elective plastic surgery is not a write off, but reconstructive plastic surgery is, and drug rehab programs, any sort of addiction program. So many different things can be a write off. Travel and mileage and hotel. When you're at the hospital, if you got, you know, some sort of cancer issue and everybody's camped out, helping. So there's a lot of things in Publication 502 that are a write off. And that's another perspective. We got to make sure we know what's insurance, what's a sharing. And then on the other side of the whiteboard, what are all these write offs that I need to track and what can I do? An HRA being maybe the first one as a business owner. Yeah. Okay. What does that bring us to? What do you think? Hsa.

Yeah. So, yeah, let's talk about the hsa, the Health Savings Account. This is probably the most common, most well known for a good reason. Now, it doesn't work with a cost sharing ministry, as we've talked about here, just to parlay that. So you can't combo a cost sharing ministry with an hsa. An hsa, again, this is how we're going to deal with expenses. But in order to qualify for an hsa, you must have a high deductible insurance plan. Okay? These are qualifying high deductible insurance plans, which are basically $1,400 deductible individual or 2800 family. That's the 2021 numbers. So I must have insurance in order to qualify for the hsa.

And before we go farther, let's juxtapose or compare it to the fsa, because I think a lot of people say, well, what about this use it or lose it thing that I have at work? That's called a flexible spending account. So there's three acronyms. Everybody, let's just get. There's no more after this. Let's just get them on the table. There's the hra, the reimbursement arrangement we just talked about. There's the flexible spending account that you might have at work where it's a user to lose it. And those are limited this year. I think about 2750. They're kind of crappy. They got really, really limited in the last couple rounds of legislation. And then the third one is this hsa. And so there are three different things. Could you have all three? Yes. Pardon? Sorry.

Omg, that was a little another three letter AC joke there.

Yeah, no, I hear you. You can have all. But you know, the beauty of this is if you fit the model, you can have all three of these. For example, some people go, well, I'm going to have a high deductible plan, but my wife and kids are going to do the cost sharing ministry. Sure. Now you get the single contribution to the hsa and your job may provide a high deductible plan that's free, but it's totally expensive to throw your family on there. So you go, oh, I'll go cost sharing ministry on the family. I'll go with a high deductible. Do an hsa. With our side hustle, we can do an hra. And oh, I got a little FSA at work too, so there's so many different little ways. You can buy it at the Apple here. Just so exciting. So anyway, I just wanted to get FSA on the table. So hsa and I'm going to set the tone for Matt here. These are like a medical Roth. That's what I love them for. Would you, would you, would you agree? Want to throw that? Use that as your stepping stone.

Yeah, the HSA is for someone who wants it all. You know, you just want everything. You want tax deductions, you don't want to pay tax as you grow your money and your investments that you're investing your HSA in. And you don't want to have to pay tax on the way out either. And you don't even want to have to wait till you're 59 and a half. You want to spend it when you have it. All right? That's the hsa. You put money in, you get a tax deduction, you invest it and it grows. You don't pay tax, you spend it on medical, it comes out totally tax free. Who cares what age you are? I mean, we all have medical. So let me walk you through how I've used it over the years because

I now a couple other facts. Before you give an example, let me say this too. You could do it at any income bracket, right? You could be a billionaire and have an hsa.

And don't itemize this, that the money you Put in, it's coming off on this above the line sort of type.

Type deduction, front page. Yeah, good point. It is not a user Lose it plan when that money goes, it could stay in there the rest of your life. And there's no waiting period like a ROTH where you have to start the ROTH and wait five years or whatever. I could put money in an HS today, hsa, get a write off and pull it out tomorrow for a cavity. And get paid for any of those medical expenses too.

Yeah. So which is exactly how I was using it. So when I started using an hsa, that's how I used it. I would just throw money into it as I knew a medical expense was coming up, you know, and it was like. And you know, you could do this with a debit card or you can do a reimbursement mechanism. That's what we do at directed ira. Just give us your medical expenses at the end of the year and we'll cut you a check back out of your hsa, easy. So, but, but what I was doing, I wasn't really focused on growing it at that time. I was focused on paying off my student loans and everything. This is back early days as an attorney. But I had, I had medical, I had kids, they were doing orthodontist. I mean, we were at the dentist, you know, all the typical stuff. And I was like annoyed that I wasn't getting a deduction for this. So I would use the hsa. It's like I had a thousand bucks coming up in medical that month or something. I knew I threw a thousand bucks in, we spent it right back out. Now if I skip that step, if I just paid the doctor the thousand bucks out of my regular personal checking account or debit card, whatever it is, that thousand dollars is gone. I didn't get a deduction for that. I had to have the health savings account in place in order to use those funds.

Yes, but just what Matt was, I thought you were going to say is, let's say I just went and paid for the orthodontics out of my pocket for a thousand dollars. If you do have an HSA plan.

Yes.

You can put the money in and reimburse yourself the next day. So it's not fatal that way. Yeah.

As long as you have the HR account.

Yes, yes. But I like what Matt said. If I don't have an hsa, thousand dollars is gone. I have no HRA plan. Thousand dollars, no write off. But if I can.

Yeah. And I think, because some people think about Matt, I Don't have money to invest. I don't worry about that. Like I'm working on student loans or I'm throwing all my money into my business. Don't worry about that. You're spending money on healthcare. Like just get the money in that you can then use to expense and for the medical. So just make sure you have the health savings account so you can use that process of spending on the medical. Now there's the next level of people for the HSA that is okay. I want to grow and invest this amount for the long haul for future medical. Okay. Because there's two different people that use these accounts and that's of course we get all the self directing and all that great stuff. And Mark and I have a separate episode just on health savings accounts on the directed IRA podcast that goes into way more detail on health savings accounts. We can do justice for today though.

Yeah. And I like that. That's a nice pitch to remind all of you. Matt and I record two podcast shows a week. One that's more general in nature for the investor. Small business owner, average American, all of us, just like you and me, everybody listening, we're just trying to protect wealth, save taxes, save money. Some of these healthcare strategies we're sharing are about just saving money, just being aware of what's going on, watching be engaged. But that second thought of, well, I'm healthy now, I can get a high deductible plan, lower premium and I can sock away 3, 4, 5, 6, 7 grand, get a write off and someday I'm going to need it. People. More Americans pull money out of their retirement account to pay for medical expenses than to live on. Is that scary? So people are saving in their retirement to pay for medical. Stop. Save for medical in your hsa. Save for retirement in your Roth and you get the bang of both bucks. So you pretty much just doubled your contribution limit every year by using the HSA for what you might think you'd use the Roth for anyway. So awesome.

Yeah. Now you can put 3600 a year, these are the 2021 numbers into your HSA. Single or if your family, this could be married or you and a kid or more, you know, family be 7200. So and that's the contribution amounts you can put in. And you could go back and forth between family or single, you know, as the case may be in your life. So but that's the annual contribution limit. So 7,200 bucks for those family, that's a $7,200 tax deduction. Now on your tax return, it's one of those things at the end of the year we're always telling clients, hey, we want year end tax planning strategies. This is one of the things to do. Make sure you have the high deductible plan because you got to have that in place before, I think December 1st in order to do the HSA for that year. And then let's get 7200 bucks in there. We know you're going to have that medical next year, the next two years at a minimum. And if you don't, great, let's invest this thing and grow it for all your future medical.

Yeah. And you have until April 15th to make that contribution. Now let's step back for a minute too and think strategy. I had a phone call yesterday with the client actually was in a webinar. It was a group webinar. That's right. And he said this is on the insurance question. So let me. Before I give the insurance question, let's digress. To have an HSA, you have to be under age 65. Let me start over. To contribute to an HSA, you have to BE under age 65. I can contribute up until age 65 and have a 500 grand sitting in my HSA to use for medical. Cool. You can still use it after age 65. I just can't pass go on the monopoly board and put in another 34, 72 or whatever. The beauty of that too is that if I don't use it for medical, if I really build it up, don't stress, it goes to your spouse's hsa. If you and your spouse don't use it for health care, you can always pull it out like a regular ira. If you, or if you die before you use it all it can go to your kids IRA and it's treated like an ira. So you're never going to lose this money. That's the beauty of it. So now here's the question I had the other day Yesterday, Mark. I'm 65 and I'm now on Medicaid and Social Security, so I don't have the ability to go buy insurance. But his wife was like 52. She was like 10 to 15 years younger than him. And so he said, how do I get her insurance and could she do an hsa? And the answer was yes to both. You can get insurance in your small business, but now you have to hire her. Normally I don't have you hire your spouse. If you have a joint plan, you cover each other and the main working Spouse can just take the only salary and you're good. Now, if you have an llc, not an S Corp, you don't have to put your spouse on payroll, but you have to have profit in the business. And your spouse can have the insurance write off even if you're not on the plan. Let me repeat that. You can have your spouse write off health insurance premiums even if you're not on the health insurance plan, but you're an owner of the business. That's tricky. That was the question in the webinar. I was like, yeah, you can do that. The other point was, can she do an HSA? Even though I timed out I'm over age 65, can she do an HSA? The answer is yes, she could do a single contribution hsa. Well, we're there. Okay, so age plays into this.

Yeah, let me give another twist on age too, because you mentioned 65. And I just had this question come up a while ago. What about Medicare premiums? You know, part B and D. And now once you get on Social Security, you start having your Medicare premium is actually deducted out of your Social Security. But the question I had was, well, can I use my HSA to pay that? Yes, you can reimburse yourself from your HSA for your Medicare parts B and D premiums. So we're, and this is, my parents have been hitting, you know, this age of do I take Social Security or not? And now I qualify for Medicare and so I can stop working. I don't need insurance, you know, and this is this age. It's kind of interesting. And for those of you getting to that close to that number, something you got to be thinking about. But the hsa, if you built this up, it's going to come out and it's going to, you're basically reimbursing yourself. So you're getting Medicare now for free rather than it coming getting deducted out of your Social Security. Now, supplemental insurance are things you don't. That's not, that's insurance you don't get a deduction for. But they have allowed Medicare premiums to be something you can reimburse yourself from from your hsa.

So cool. I love it. Now let's, let's take a breath for a moment. This was a lot of info, like drinking from a fire hose. In the medical, which we all hate generally, the medical expense topic, insurance premiums, a lot of people just get anxiety thinking about the cost of it. It really is devastating to a lot of families. So some of you may be thinking, gosh you spent the bulk of the time on HSAs. We didn't mean to do that. It's just that they probably are the most creative, lucrative and most successful way to build wealth. And so we want to make sure that we are careful with thinking that everything revolves around the HSA as well. But it is probably the most fun and creative. But do I some years do the HRA and not the hsa? Yes, and vice versa. Can I always make sure I'm writing off my medical insurance premiums and do an HSA and nhra? Yes. If I'm single, is it going to be maybe a different perspective if I'm married, how much of the premium should I go with? A cost sharing strategy. Sharing strategy to just save on expenses and say I don't need the write off. Hell, I'm saving more even if you take the write off into account. And so you have to kind of spreadsheet this out once in a while. So everybody don't stress. Talk to someone that knows your tax return. This is where our tax attorneys and CPAs are trained to do. If your accountant isn't having this conversation with you, you, you don't have to fire your account, but at least get the consult from someone that does know it and then take it back to them. Yeah. So.

All right, well this is a big topic and it's one we are all spending money on. We just want to do it in a more tax efficient way to keep more money in your pocket. And there's a lot of things out there. That's one thing our government has done is they've tried to create mechanisms to help you save on Medicare. Sorry, sorry. On medical and health care expenses. And. But you just have to take a proactive, you have to have a plan whether you're doing the HRA because you're a business owner and you've got good medical, you know, you're higher medical expenses whether you're doing an HSA account and saving for the long haul or using it to spend immediately. So you get a deduction for the money you're throwing in. I mean these are all things that you just, you have to, you can't do it after the fact. You, they force you with health care to make a plan, put it in place and then do your medical through that. And it is a little complicated at first, but eventually you're just going to keep doing the same thing over and over again. What you did last year, you're going to do this year. It's going to save you a couple thousand bucks, at least a year in taxes if you're doing it right. And at the end of the day, this is a lot of money back in your pocket just by doing a few simple steps.

Love it. Well, everybody, thank you for putting up with our dumb jokes and our unique way of maybe tackling what we think are exciting topics. We're grateful to be here with you. We love doing this podcast. Probably one of the most favorite things I do is. And it's the time. I spend more time with Matt doing our podcast than anything else. Many people, you know what we do after the podcast is over, we're like, we gotta talk.

I know. Yeah. So. So, yeah, I always have a great time. But thank you, everyone. And go to mainstreetbusiness.com to sign up for the newsletter to get updates on what we're doing, the workshops we talked about, upcoming podcast episodes, podcasts you might have missed, articles we got going on. There's a plethora of information that you'll find on the newsletter, and we'll see you back next week on the Main Street Business podcast.