Health Care Expenses | Year End Tax Tips #3

Welcome everybody to a live conversation about how to save on our medical expenses. And take 100% write off for all of those things such as dental, eyes, copays, deductibles, surgeries, chiropractic, acupuncture. Anything that you're paying for in medical can even be therapy, counseling. Those can be 100% write off on your tax return, but millions of Americans miss it every year. We're going to break it down now and your options on how to write off those expensive medical costs. Now, my name is Mark Kohler. I'm a CPA attorney, best selling author, an entrepreneur myself. I own rental property. I love small business and I've been in the tax and legal industry now for 25 years helping small business owners figure this stuff out. I've done my 10,000 consultations and freaking A. We're going to knock it out here on what you can be doing better with medical expenses. Now there are four ways. It's that simple. There's only four freaking ways to write off your medical expenses. And I'm going to go to the whiteboard. Okay, so 1, 2, 3, 4. Number one is you itemize. Now this is what is called schedule A, itemized deductions, Schedule a on your 1040 tax return. We'll come back to that. The next one is the fsa. That's the flexible spending account. And some of you might have this at your work. If you have a day job and this is the use it or lose it plan, we're going to come back to that. Then there is the hra, which is a health care reimbursement. Care reimbursement, that's health reimbursement arrangement. And these are for the small business owner and they can use them with or without employees. It's often called a 100 misspelled, that is often called a 105 plan. These are for small business owners. This is more corporate employee and this is small business owner. Then the fourth one is the health savings account or HSA Health savings account. And let me give you a spoilers alert. This, my friends, is the best way to write off medical. Any American can do it. Small business owner or corporate employee. I'll give you the parameters and it's incredible. Wonderful, wonderful, wonderful. I love this. We're going to talk about that a little bit more. But these other three are viable options. So let's go back back to our list here. So we have the itemized a schedule a 1040. Now when you go to file your tax return, you get to choose between the standard deduction or itemizing. Well, the standard deduction this year is so much. It is $14,600 for an individual, $29,200 for a married couple. So if you itemize, you're writing off your mortgage, interest, some charity, and your medical. Those are the three big ones. Well, holy crap. Well, $10,000 worth of state income tax or property tax. That's called salt. Well, the standard deduction has gotten to be so much. Do you know only 9% of Americans even itemize? And you can only write off medical expenses 7.5% above your adjusted gross income. So if you make 100 grand, you can only write off your next $7,501. So if you have $7,501 in medical expenses, out of pocket, copays, deductibles, dental, eyes, whatever, you can write off one dollar. Because you can only write off everything over seven and a half percent of your. This is terrible. 99% of Americans never get to itemize their medical expenses, and only 9% are even itemizing to begin with, which is 14 million Americans out of over 162 million tax returns. It's ridiculous. So we don't want to itemized. Now, number two is the flexible spending account. Now, these are popular if you're in a corporate employee scenario. They're nice. They're going to give you this year $3,200. That's the max. Some companies only give you $1,000, but they say turn it in your receipt. But if you don't before December 31st, there's a little extension into the new year. But if you don't turn in your receipt, you lose it. It's use it or lose it. Terrible for small business owners because you're never going to do a flexible spending account. You can't in an S corporation, which our small business owners are. Anyway, you don't want to worry about a flexible spending account if you're a small business owner. If you've got FSA at work and some company's throwing you $1,000 or 2,000 bucks, use it, but don't lose it. But it's not going to move the needle when you've got a lot of medical expenses. So then we come over to the hra. Now, if you're a small business owner and you don't have a lot of employees or any employees, oh my gosh, I can work some magic over here. But again, it's going to be a sliver of small business owners that have higher medical. No employees. And have that schedule C. So we're going to be. It's still great, but it's not for everybody. And again, it's only for those small business owners. Now that brings us to the fourth option, which I want to dive deep on now. And all of you here on YouTube, Instagram, LinkedIn, TikTok, Facebook, I'm live. I'd love to hear your questions, so please start typing them up now. As soon as I finish a little spiel here on this HSA and how freaking awesome they are, then I want to answer your questions and help you write off all your medical expenses. It is so important. Do you know the number one reason for bankruptcy in America are medical expenses? Do you know when you turn age 55 between, it's now estimated once you turn 55 between now and you're 55 and your date of death, you're going to have over $350,000 in medical expenses before you die? Mark, I just needed retirement. Now you're going to tell me I got to worry about medical expenses too. I thought I had Medicare. That's with Medicare. So you've got to be on top of this. So the health savings account is that fourth column. Now here's what's cool about a health savings account and I want to just make some of these points. In fact, let's do it on the whiteboard. Hsa. Here's what I love. First of all, it's an account. It goes with you. It's not use it or lose it, not use it or lose it. It's like, and this is the next bullet point, an IRA because it's a tax preferred vehicle. And that money grows and goes with you wherever you go. It's not your employer. If you leave your employer, you get to take your HSA with you. Now what's cool about an HSA is you get a tax deduction when you put money in it. You get tax free withdrawals at any age. You don't have to wait till you're 59 and a half. So tax free withdrawals at any age. And what's even cooler, it grows tax free. Guys, this is a triple. You get tax deduction, tax free withdrawals at any age. Gross tax free, any medical expense. Now if you want to know what medical expenses qualify, you want to go to Publication 502 and you can just download it right there on Google and it'll tell you every medical expense that you can use out of your hsa. Now I know some of you are going, Mark, have you seen the Freaking economy. Have you seen how difficult it is out there to pay for housing, travel, auto? When I say travel, I mean transportation, grand groceries. I get it. Here's how cool the HSA is. You don't have to be rich to do this. If you're going to go to the doctor on Monday, let me just give you two options. You're going to go to the doctor on Monday and there's going to be a copay of 100 bucks or 50 bucks or whatever. You're going to have to go down to CVS or Walgreens and get a prescription. You're going to go get some new glasses down at LensCrafters, whatever. That's next Monday. Let's say you're going to have two or three hundred dollars in medical expenses. On Friday, you put three hundred dollars in your HSA account and then you use your HSA debit card, which you get with an HSA account and go into The Doctor or LensCrafters on Monday and pay for it. You just got a tax write off. So you put the money in the HSA before you go to the doctor and you get the write off. Now, this year you can put up to. There's the next number. I want to give you $8,300 you can put in your HSA this year if you're married. If you're single, it's $3200. I'm sorry, 4150. Sorry, it's exactly half. So it's 4150. And that's head of household, too. So if you have children, you still qualify for the family. So this is family, married or with children. And this is single. You can put that money in and use it for medical all year long. Now let me give you option two. So remember, you're going to the doctor on Monday, you're going to LensCrafters on Monday. If you have an HSA, you can go to the doctors on Monday and LensCrafters spend your $300. It hurts. I get it. And then on Tuesday, go put the money back in your. Take $300 from your mom, I don't know, somewhere. Put $300 back in your HSA and take it out on Thursday. So you're reimbursing yourself through the hsa. You get a tax write off. This is how you launder money. Okay? So you're gonna put the money in your HSA and reimburse yourself for going to the doctor yesterday. That's allowed. You just have to have an HSA account put the money in, take it out, pay for medical, or go pay for medical, then put it back in your hsa, Put money in your HSA and reimburse yourself. You can reimburse yourself for up to two years ago for medical. Now, there's two major, maybe two or three major rules here. In order to do this whole process, you have to have a freaking HSA account. You can't go spend a bunch of medical, open an HSA and then go do the reimbursement. You have to have the HSA account open an account and put a dollar in it. Just start the clock by having the HSA open number two, you have to have a high deductible medical plan. You can still have an hmo, ppo, Blue Cross, Blue Shield, AM better, whatever, I don't care. But it has to be a high deductible plan that qualifies for an hsa. Now, for all of you that are at work and they give you medical and you're like, I don't even use it. Call up HR on Monday and go, hey, I want an HSA plan. When is enrollment? Now, if you're a small business owner or don't have health care through an employer, guess what tomorrow is? November 1st. It's enrollment for medical. It starts tomorrow. November 1st is the beginning of medical enrollment for health insurance plans. You can go to IRS, healthcare.gov sorry, I was thinking IRS website earlier today dealing with that. You're going to go to healthcare.gov certain states have their own exchanges. You're going to go to healthcare.gov in most states and just shop for a medical plan. Some folks here in my studio, I have young people in my studio. We went and got on healthcare.gov and got one of our producers here. A health plan in an hour. Was it less than an hour? I think it was less than an hour. And she had a whole medical plan done. And what was your premium per month? 120, 100? No. Was it under 100 or was it 2, 3, 200 to about $200? Single plan, HSA qualified. So she's got now health insurance. If something bad really happens, car accident, who knows what a high deductible plan means? At least a $3,000 deductible. Now the high deductible plan for a family is 3,200. For an individual, 1,600. So she'd have a high deductible plan for at least $1,600. Still goes to the doctor, pays out of pocket for little things. If anything bad Happens. She still has insurance, but now she can drop this year 4150 into an HSA again. You guys want to hear the crazy part? This isn't even the good part. This is all good. Let me tell you the great part. When you put that money in your hsa, you can invest it however you want. You can buy cryptocurrency with your hsa. I, I own real estate with my hsa. I have a rental property that pays rent to my HSA that pays for my medical tax free. So not only every time I pass go, when it's like monopoly, I can put in my 4100 or 8200 every year. I can also invest it, double it with Solana or Bitcoin. And now my account's worth 15 grand. And next year I can put in another 4180, 200. So I'm building that account so I can pull money out for medical tax free anytime I want. And you get a tax deduction on the front page of your tax return to do this. Now, here's the last issue of the rules. You have to have your plan set up before year end. That's right. In the next two months, you got to have it set up before year end to get a write off for 2024. So if you want to write off in 2024, we've got to get your plan in place. Now, come January in 2025, your enrollment at your job, or you're a small business owner, you have a qualifying event, you get new health insurance next year, you could do the HSA next year, but you have to have the plan in place this year. Now, when do you want to put your money in your hsa? You have until April to do it. And then you can put the money in and get a tax deduction again. Up to 4,150 or 8,300 huge guys. The list goes on and on. The Health Savings Account is the best kept secret in tax planning. It's like a supercharged Roth IRA that you can use the rest of your life for medical. Now, once you start taking Medicare, Medicare insurance, typically around age 65, you can't put new money in the HSA, but you can continue to invest it and pull it out for any medical. So that's one of the other rules. If you're between 55 and 65, you can put a makeup provision of 1,000 extra dollars if you're single or 2,000 family. It's amazing. All right, so I want to jump over to any questions you might have. Those are the four ways to put money into to write off your medical. You have to choose one of them. I'm telling you FSA is okay. Use it or lose it. Hra if you're a small business owner and all of you have got to be doing the hsa, it's out of control. So cool. Now I've got right here my book also that you can get on Amazon is the Tax and Legal playbook. You can pick up a copy, have a whole chapter on this on medical. Go check it out. It's on Kindle, it's audiobook as well. And in four five weeks we have our semi annual conference. Three days in Phoenix. Three days tax and legal 360. 20 plus speakers, three days of strategies. We're going to be talking about HSAs there and 24 different classes on how to save taxes and build wealth, grow your business, asset protection, estate planning, parties every night, networking with other business owners and tax advisors and lawyers. Everybody's hanging out together building the American dream and the small business on Main Street America. Please check it out, it's at tax and legal360. Get a copy of the book. I'm not going anywhere. If you're loving this message, please subscribe. Hit the bell icon. Every week I go live with another year end tax tip. We talked about S Corps two weeks ago, family board meetings last week and today we're talking about HSAs. I've got freaking, let's see at least 10 more year end strategies. I'm going to be covering every Wednesday or Thursday for the next two months, so please stay tuned. Now let's go to some questions and help point you guys in the right direction on this medical expense topic. What do you got Dana?

We have a couple questions that all kind of basically ask something similar which is just what is a good way to start out with an hsa as far as a provider is this something you refer out what's a good way to get started?

Okay, so let's do this. I'm going to go to the whiteboard, how to get started here. The first thing is you have to remember health insurance is separate from the hsa. So you have to do both. So we're going to do health insurance and it has to be a high deductible health care plan. So you have to get health insurance and then combine it with the health savings account. So this account that you're going to open up, you can open up the account anywhere you want. Just go Google Visa, HSA account. And there's companies out there that'll set it up, send you a visa, give you an online portal, and you can just make contributions to your HSA. Remember, 8,300 married or family, 4,150 single. So you can go put that right now in an account and get a Visa account and start putting money in and taking it out when you do this. This is methodology number one. Basically, you're getting your write off, you're getting your tax write off for all of your medical expenses. That's great. That's option one. Now the long term play is option two. So in this strategy, you take your health insurance, you're still going to go get your health insurance, and you're going to combine it with an HSA account, but it's going to be a self directed HSA account. So it's an account that you can invest and you can open up one of those accounts right now online@directed ira.com at directed ira. Oh, directed. Spell that properly. It is directed ira.com and that's where my HSA is. You can buy crypto real estate invested in syndication, small business, whatever. Now when you do this, you're not going to be taking write offs, you're going to take write offs when you contribute the money. So you got to open the account, open the HSA and then put money in. That's when you get the write off. Same thing over here. You're going to put money in and get the write off, but you're going to pull it out right away for medical expenses if you need. On option two, you're going to put the money in and then invest it and let it grow tax free. And when you're growing it tax free, this 4, 5, 6, 7, $8,000 in just five or six years is going to be $100,000 plus. Now you're covering your medical the rest of your life with this hsa. So that's option two. So that's the best. So you have to decide, do I just want to open an HSA to get reimbursed? Cool. You can reimburse before the doctor visit, after the doctor visit, like I talked about, or you're going to go option two and let that money ride and invest it and grow it and then pull it out in the future when you need it. All right, next question.

All right, next question. Would it be a red flag If I take $50,000 in deductions, including the HSA, while my company is not profitable and not able to pay me this year?

Okay, so this person said they're going to take $50,000 in write offs for medical.

It looks like $50,000 in deductions, including the HSA. So in general, it looks like.

Is that a red flag? Hell, no. It's fine. Okay, so everybody, if you have your 1040 tax return, and this caller is saying, oh, I have a small business over here on a schedule C, and they said they lost 50 grand, they had a loss, and they're going to deduct that on their 1040 against maybe a W2, their spouse's W2. I don't know. That's what I think they're asking. Now, maybe they had an S Corp with a loss a 50 grand. I don't know, but they had a loss doing business. Now, I don't want to have a hobby loss problem and have losses year after year in my schedule C. But let's assume. See, the issue of your loss here has nothing to do with your hsa. Your HSA comes in over here. A deduction. It's not a loss, it's a freaking deduction. Like you're putting money in your IRA or your 401k. They're amazing. Iris doesn't care. Those are great, but these are two different issues. If you've got a loss of 50 grand. I got some issues. Anyway, I'm going to ask you, how in the hell did you lose 50 grand? What type of business, what type of return? What's that look like for next year? That could be a red flag in and of itself. Adding the HSA deduction has nothing to do with this in the HSA. I've never even 25 years seen the IRS audit an HSA contribution. You're fine. So they're two different issues. Please get a consult with one of my tax lawyers on this major lawsuit you're facing in your small business. Next question.

All right, probably our last question here tonight is what happens to your HSA when you die?

Oh, I love it. Well, let's talk about what happens with your HSA as you live, too. So you start your HSA and you start putting money in, and then next year you put in a little more, and then three years from now, you even put more in, and then you put a little more in. Meanwhile, it's investing and growing and your money's going. And then, oh, I have some medical, I take it out. I take out some medical, I take it out. Oh, at age 59 and a half, what? Once I turn 59 and a half, I can take it out for even non medical expenses. So this is all for medical. I have to take it out tax free for medical expenses. If I take it out for anything other than medical, it's a penalty and I pay tax. We don't want to do that. Leave it alone. Just use it for medical. But Once I turn 59 and a half, I can use it for non medical and medical. I can use it for both. So I can do either or. And this is still taxed, but there's no penalty. It's just like a regular IRA. Then let's say I'm 80 years old, I've lived a wonderful life and I die, okay? Now it turns into an HSA for my spouse. They get to keep it if I'm married when I die. Or it turns into an IRA for my kids and they get to use it like a retirement account. People, the money stays with you. The government doesn't get it and it stays tax preferred for your spouse or your kids down the road. It's amazing. All right, everybody please get a copy of my book. Check out tax and legal360. This is a tax deductible trip to come to tax and legal 360. And who doesn't want to be in Scottsdale, Arizona in December? It's beautiful. Come do your Christmas shopping. The Fashion Square mall is across the street from the Scott Hotel. We've reserved the entire hotel. We're having a denim and diamonds line dancing night on Friday night, a VIP casino night, lunches every day. It's going to be incredible. Please check it out at tax and legal360. If you're an advisor, get over to our and do a demo on our certification program on being a tax advisor and getting on our network where clients are showing up every day if you want them. And also get a copy of the book. Just read up on this HSA. Study up on it. I got other videos on YouTube podcasts on this. I'm not going anywhere. And I'll see you next week for another live.