There is a little known government program that every self employed person should be using. You now can take advantage of tax saving that big companies have been using since 1954. This program helps you reduce the cost of your health insurance. It can provide you with tax savings. It is an HRA (Health Reimbursement Arrangement Section 105).
The self employed can also benefit from the HRA (Health Reimbursement Arrangement) with an average tax savings of $3,000 to $5,000 a year.
The HRA allows them to deduct 100% from their business a large list of eligible medical expenses such as braces for children, lasik surgery, alternative care, massages, and traditional costs from illness and injury. This program also allows the self employed to eliminate paying the 13.3% self employment taxes for Social Security and Medicare.
Let's examine that a little closer. Right now you are probably deducting the cost of your health insurance premiums when figuring out your tax liability. That probably saves you a nice amount of money on your taxes. By installing an HRA your can save more, much more. With an HRA you can deduct, as a business expense, your deductibles and coinsurance. So if you had an episode that left you hospitalized and you had to pay $5000.00 in out of pocket costs having an HRA you will be able to deduct the full $5000.00 from your business taxes.
If you have to buy glasses $600.00, that's a deduction. You have lasik surgery $2500.00, that's a deduction. Your kid needs braces $3500.00, that's a deduction. Alternative therapy, massage, acupuncture, all deductions. You can also deduct the premiums on supplemental insurance, accident, long term care, term life, vision, dental and critical illness. In fact there are hundreds of medical expenses that qualify as deductions under the HRA.
An HRA + The Affordable Care Act = TAX CREDITS
We've discussed how an HRA can save you money on your taxes by provided you with more tax deductions. A tax deduction is an amount of money that you deduct from your gross earnings. This lowers your gross earnings which lowers the amount of taxes that you pay.There are also tax credits you can take advantage of. A Tax Credit differs from a tax deduction. Tax credits are real money that the government provides you to pay your taxes with. If you had a tax liability of $4000 and a tax credit of $1500 you would owe $2500 in taxes.
Do you know what the Affordable Care Act can provide for small business? Potential tax credits of up to 35%! There is a small group tax credit for contributing to employee heath insurance premiums: If you have fewer then 25 employees and provide health insurance, you may quality for a tax credit of up to 35% to offset the cost of insurance. This makes the cost of providing insurance lower.
IF you install an HRA plan in your company, you may not need to have a group health plan to qualify for the Affordable Care Act tax credit, provided that you meet a few simple rules. An HRA allows you to take the tax deductions and receive the tax credits without the cost of providing group health insurance.
By install an HRA plan your company can save thousands by reducing their tax liability and receiving tax credits without the cost of group health insurance. This could just be the biggest tax break that the government has ever given to small businesses.
Michael J. Ferro
President
Ferro Financial Services, Inc
http://www.ferrofinancialservices.com/
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