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Find tax relief from a medical-reimbursement plan

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in Employee Benefits Program,Human Resources,Small Business Tax,Small Business Tax Deduction Strategies

As a small business owner, you generally can deduct 100 percent of your family’s medical insurance costs even if you’re self-employed. But you can do better tax wise by taking an unusual approach.

Strategy: Set up a self-insured medical reimbursement plan—also called a Section 105 plan—for your business. This kind of plan reimburses specified medical expenses to your employees—and to you—from the business’s coffers.

Assuming that the plan is in writing and meets other technical requirements, it’s a win/win situation. As the employer, you can deduct the reimbursements, including those to cover employees’ out-of-pocket medical costs. And eligible employees generally aren’t taxed on this perfectly legal fringe benefit.

Sound too good to be true? The IRS approved this medical reimbursement setup years ago. (IRS Revenue Ruling 1971-588) But you must toe the line to avoid any tax trouble.

Here’s the whole story: Typically, a Sectio...(register to read more)

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