I had a no-charge telephone consultation today with a successful small business owner in California who has a very reasonable business plan to have his small business pay the substantial out-of-pocket medical expenses on a pre-tax basis. The tax savings can add up to $5,000 to $10,000 per year for a high income person with high out-of-pocket medical costs. The most common approaches are through the use of a Health Reimbursement Arrangement (HRA) or a Medical Expense Reimbursement Plan (MERP). I help small businesses set up and run HRAs and MERPs expressly for this purpose.
The plan makes perfect sense except that this fellow is on Medicare and his business does not sponsor a group health insurance plan. Each of these is a separate obstacle or “tax trap” that I included as #7 and #9 in this article late last year. The tax penalty is ridiculous. He agreed.
The only assurance I could offer is that this known issue will likely be addressed under a new tax law likely put through by the next president, regardless of who it is.
Meanwhile, I have many other articles and ideas for saving taxes on health care expenses. Just ask or see this bibliography.