One of the bonuses you get entitlement to as a home based business owner is non reimbursable medical expense deductions through a medical expense reimbursement account for your spouse and children.
Deducting medical expenses is usually not permissible, unless the expenses exceed a certain amount of a tax filers adjustable gross income. This threshold usually precludes most medical tax deductible items and doesn’t allow for deductible medical expenses on one’s tax return.
A friend of mine is a trader and works from home. His wife helps him with accounting and paperwork while he travels, handles client relationships and executes the import and export trades.
They were over the other day and his wife was discussing how expensive braces have become. They have a daughter who is getting ready to get braces to straighten her teeth. My friend (the Dad) soon added that he intends to get LASIK surgery done in the near future. This prompted the discussion of the potentially deducting medical expenses under IRS Publication 502.
If you own a home based business, you are entitled to establishing a medical expense reimbursement account that you can offer to your spouse and their children (therefore yours too) if you were to employ your spouse in your business.
Under this circumstance, deducting medical expenses can significantly help the business owner’s family, especially for a family like my friend who will be paying for braces, LASIK and all kinds of other over the counter medical stuff.
As discussed earlier, the Internal Revenue Service (IRS) allows an income tax deduction for someone who itemizes on their 1040 – income tax returns. However, there are thresholds to meet (medical expenses have to be a percentage of AGI – adjusted gross income) before one can claim this medical expense deduction. Expenses that cannot be deducted are labeled as non-deductible medical expenses.
But not for home based business owners! Under IRS Section 105, a home based business owner is permitted to hire their spouse and pay them just in benefits. Yes, no salary is required and you can pay through a medical expense reimbursement plan adopted by your home based business. The beauty of this is that your spouse’s children, therefore yours, are also qualified to receive the tax write offs.
IRS Publication 502 provides a lengthy list of tax deductible items that are qualified under a medical expense reimbursement plan. Here is a snapshot of that list.
What Medical Expenses are allowed as an Income Tax Deduction?
I don’t even know what some of these mean, and this is just one component of the publication. Visit the IRS’s website to access the rest here.
I have always believed and preached that establishing and owning your own side business is the best tax planning strategy, and since income taxes are your biggest lifetime expense, the best way to get ahead in life.
Deducting medical expenses is yet another big benefit of owning a side business and further reinforces that belief.
Readers: Did you know this option was available for you if you owned your own business? Now that you do, do you plan on taking advantage of it now or later? Why or why not?Previous: Are You Accidentally Hurting Your Credit Score?