Section 105 Health Reimbursement Arrangements
Sunday, March 24, 2013 at 12:57PM
Gina Alsdorf

Do you have unreimbursed medical expenses and Schedule C income?  If so, Section 105 of the Internal Revenue Code may be the key to keeping your health expenses in check as a small business.  A self- insured reimbursement plan once adopted by the employer or by you using your name if you have no separate entity, enables you to pay unreimbursed medical expenses and premiums out of your business directly and use these expenses to offset Schedule C income for your single member LLC or Sole Proprietorship. 

Normally to take a deduction for medical expenses, when you itemize these expenses must exceed 7.5% of your gross adjusted income.  However, with a section 105 health reimbursement plan, the reimbursement can start with the first dollar. Each and every, dollar spent on "qualifying  medical expense."

This begs the question, what is a qualifying medical expense?  These can be found in IRS Publication 502 and are pretty inclusive.  Regardless, if you have any sort of chronice illness, adopting a seciton 105 Health Reimbursement Plan that is self-funded (ie. paid out fo general assets of the business) can be extremely helpful!.  


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