In this instructional video, Mark J. Kohler explains health reimbursement arrangements (HRAs) as a tax‑saving tool for small‑business owners. He first clarifies what an HRA is not—distinguishing it from health savings accounts (HSAs) and flexible spending accounts (FSAs). He then outlines who can use an HRA (small‑business owners and their families) and the corporate structures that make it feasible, noting the limitations of S‑corporations and the workaround of using a sister C‑corporation. Kohler provides a cost‑benefit break‑even analysis, suggesting that $4‑5K in medical expenses typically justifies the administrative cost of an HRA. He describes how to self‑administer an HRA using a $400 legal document package from his firm, and emphasizes the importance of evaluating the expected write‑offs versus the setup cost. Finally, he shows how an HRA can be paired with an HSA to increase total deductible medical expenses, and urges viewers to consult their accountants, consider his firm’s services, and subscribe to his newsletter for ongoing tax‑legal strategies.
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Have you heard of the health reimbursement arrangement or hra? If you have a lot of medical expenses, this is a strategy you have seriously got to consider. It can help you get a tax write off for all of your medical expenses up to a certain limit. Let's break it down. First. Let's talk about what an HRA isn't, then what it is. I think that'll be most helpful. Well, an HRA is not a health savings account. That's like a supercharged IRA for health care. Love them. I have other videos on that. Check them out. And you don't have to be a business owner. And if you want to put money into this hsa, you get a tax deduction. No AGI limits. They're wonderful. But an HRA is different. It's also not a flexible spending account that use it or lose it plan that might be at your work and they put some money in it and you use it or lose it. That's an employee type plan, a flexible spending account. The HRA is a plan for a small business owner. You got to have a small business to use an hra and then you can deduct medical expenses inside your small business and get a tax write off up front. That's pretty awesome. Now, I did state small business owners. That's right. You have to have a small business because the HRA is a health reimbursement arrangement. It's a plan and it's either for you or your family members that include their dependents and backdoor yourself in. So there's a specific structure for it. If you have an S corporation, you can't generally have an HRA in your S corp to help you and get a direct write off. Now you can set up some HRA plans that help you at least get around fica. But I want more than that. So usually what I do is set up a sister company where the HRA is a deduction inside a support company for your spouse if you're married, and then their dependents, which is. You read my book, the Tax and Legal Playbook. I have a whole section on this with diagrams. If you're single, you can do the same thing, but you use a C corporation and hire yourself out of your S corporation in a C corp. Now, it sounds elaborate, but the point is, if you can write off an extra ten grand in medical expenses, some of these little structural headaches are well worth it. So talk to your accountant, look at the structure and what type of business you have. That's really the first step I really find the break even point where an HRA pays for itself is around 4 or $5,000 in medical expenses. Because think about it, if you can get an extra $5,000 write off, you're in a 20, 25% tax bracket. That's about 1,000 to $2,000 in tax savings. Well, that pays for the headaches of kind of doing this. Now an HRA plan is something that you can implement yourself. We have an HRA document that you self maintain yourself. You don't have to have a bank involved or health insurance company. It's self administer around 400 bucks at our law firm and it includes a consultation with an attorney and then you're off to the races. And you can maintain it on your own. But you want to look at the cost benefit analysis. How much do you really have in medical are you going to write off $5,000 or more and what's it going to cost to maintain? And once you figure that out, you can decide if an HRA is good for you. Finally, the HRA plan can be used in conjunction with a health savings account, so you can have both. And so if you do it right, you can now start getting write offs of close to $15,000 or more. In a family you can really get a lot of write offs for your medical expenses that can generally be difficult to write off. Itemizing is not the way to go. And if you have a small business, you want to look at your options here. So do your research, talk to your accountant, give our law firm a call. We'd love to be of service. We don't have to be your accountant to help you get the plan implemented and then you're off to the races and saving big money on those medical expenses. 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 marjoriecoehler.com with all sorts of videos, probably 70 plus videos, 30 plus hours of content. That'll save you thousands of.
