The Self-Employed Can Save up to $4,000 in Taxes by Hiring Their Spouse and Starting a Section 105 HRA

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Tens of thousands of self-employed individuals are saving up to $4,000 a year in income taxes by hiring their spouse. Section 105 of the IRS Code, Revenue Ruling 71-588 and IRS Letter Ruling 9409006 have allowed these small employers to compensate their spouse by reimbursing their health insurance and out-of-pocket medical, dental and vision expenses not covered by insurance.

Core Documents, Inc., a leading provider of Section 125 and Section 105 HRA Plans, reports that any married, self-employed individual can take advantage of large tax deductions by using Section 105 of the IRS Code, Revenue Ruling 71-588 and IRS Letter Ruling 9409006. These Rulings allow the self-employed business owner to hire their spouse and compensate them by paying their health insurance and out-of-pocket medical, dental and vision expenses. The self-employed business owner, who is not allowed to participate in Section 105 HRA or Section 125 plans, have their expenses covered because they're a dependent of their spouse. It's a round-about way to take the deduction but it's completely legal.

The New Year is when most self-employed business owners establish a Section 105 HRA plan. Now is the time to consider establishing your own Section 105 HRA Plan for the coming year.

Here's how most people handle insurance and medical expense write-offs without a Section 105 HRA Plan:

  • the self-employed are allowed to take a 100% write-off of health insurance on their year-end tax return,
  • however, they can only write-off income taxes, they're not allowed to write-off the 15.3% self-employment tax (FICA),
  • the self-employed can only write-off medical, dental and vision expenses if they exceed 7.5% of the Adjusted Gross Income (AGI),
  • so, if you make $100,000 AGI you are not allowed to take the first $7,500 in out-of-pocket medical expenses, you can only take expenses in excess of $7,500.

With the Section 105 HRA Plan you will enjoy 100% write-off of health insurance premium, including the 15.3% self-employment tax, and 100% write-off of out-of-pocket medical, dental and vision expenses without the year-end tax return limitations.

In a recent interview with Gene Ennis CFC, the President of Core Documents, Inc. the nation's leading provider of Section 125 and Section 105 HRA Plan Documents. We asked Mr. Ennis how much it cost to establish a Section 105 HRA plan. He told us Core Documents can provide self-employed individuals with everything they need to successfully establish their own Section 105 HRA for only $99 plus $15 shipping and handling. Most small employers choose to administer their own plan internally. However, for those employers who choose to outsource administration, Core Documents will administer the plan and provide employers with 24/7 state-of-the-art web based access to their account information plus a MasterCard debit card for the spouse to access the funds for only $8 a month. See more information at: http://www.Core105.com

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GENE ENNIS, CFC
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