Medical Tax Strategies - Tax Stategies - How to Spend Money
Medical Tax Strategies
A medical reimbursement plan for a smaller corporation is one of the best tax strategies there is. The reimbursements are 100% deductible for the corporation and are ZERO income to the employee.
As long as you offer the same plan to all the full time employees of the company, you can make it as comprehensive as you want.
So if you only have a one person company, it is an easy choice to make a plan that covers just about everything that is paid out on the human body. And make it cover the employee's family as well!
Here is a short list of some of the things that have been considered to be medical reimbursable expenses:
- Accident and Health insurance
- Acupuncture
- Adoption
- Air conditioner
- Alcoholism treatment
- Ambulance costs
- Birth control pills
- Blind person's attendant
- Braille person's aids
- Capital expenditures or home modifications for handicapped individuals
- Car or ban equipped to accommodate wheelchair passengers
- Childbirth preparation
- Chiropractors
- Christian Science treatment
- Clarinet and lessons to alleviate teeth malocclusion
- Computer data bank for storage of medical records
- Contact lenses
- Contraceptive
- Cosmetic surgery
- Dental fees
- Dentures
- Doctor fees
- Domestic aid
- Drug addiction recovery
- Drugs and prescriptions
- Dyslexia language training
- Electrolysis
- Elevator to alleviate heart condition
- Eye exam and glasses
- Hair transplants
- Health Club dues (prescribed by doctor)
- Hospital care
- Hospital services (outpatient)
- Indian medicine man
- Insulin
- Iron lungs
- Laboratory fees
- Lead paint removal
- Legal expenses
- Mattresses
- Massage
- Nursing homes
- Nursing services
- Obstetrical expenses
- Operations
- Orthopedic shoes
- Osteopaths
- Patterning exercises for handicapped children
- Prosthesis
- Psychiatric care
- Psychologist
- Reclining chairs
- Remedial reading schools
- Sexual dysfunction
- Sterilization operations
- Swimming pool for treatment recommend by a doctor
- Taxicab to doctors office
- Telephones, equipped for deaf persons
- Televisions (close captioned decoder etc)
- Transplants
- Vasectomies
- Vitamins
- Wheels Chairs
- Wigs (for alleviation of mental discomfort)
For a complete list of what the IRS says is deductible and how to treat it tax wise, go to IRS Web link.
As you can see there are many things that we all spend money on for ourselves and our families that can be paid for with tax free money.
If you have a corporation and do not know how to put this in place (we include instructions with each new corporate kit that we send), contact us and we will be apply to send you instructions on how to start a medical plan now.
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Tax Strategies
Just the simple act of incorporating can protect your personal assets, reduce taxes and provide a universe of "fringe benefits" such as retirement plans, deferred compensation, annuities, life insurance, and medical reimbursement plans just to name a very few. Moreover, some of these benefits may be tax deductible to the corporation and tax-free to the employee (that would be you).
Here are some ideas as to how some people structure their companies to realize the best benefits for them. Many of these ideas can only be used with a C-Corporation.
What You Can Achieve
You can legally take advantage of many outstanding tax benefits and lower your taxes to only 15%. You can eliminate state income taxes. You can delay paying your taxes for another year. Whether your profits are realized through regular investing, a long-term trading approach, capital gains or dividend income, a corporation can create a structure for you that will best meet your tax-reduction needs.
15% Tax on Profits
How much do you pay in taxes on your personal income? With the IRS, the more you make, the higher percentage of your income goes to the government. Personal tax rates start at 10% then rapidly go up to 15%, 25%, 28%, 33% and 35%. Many states also impose a personal income tax. You are probably also paying Social Security taxes at 12.4%. Medicare takes 2.9%. You may also be paying FUTA, workers compensation, transportation taxes and so on. One man calculated that with all government taxes and deductions, he was paying 62% of his income to the government. He was left with only 38¢ out of every $1 earned (35% fed + 12.4% social security* + 9.3% state + 2.9% Medicare + misc. taxes). Then there are also capital gains taxes. You pay those on your gross capital gains and there are few deductions. What if you could take the top $50,000 you earned (the money taxed in your highest tax bracket) and transfer it to an account that would be taxed at only 15%? You can. The first $50,000 in profits earned by most corporations are taxed at only 15%! A corporation pays no social security taxes, no Medicare and no workers compensation on its own income. Would you like a new tax plan saves you over $20,000 in taxes every year? Would that help your investments grow much more rapidly? You can.
If you are only in the 28% tax bracket and you move $50,000 of your income into a corporation you will save $6500 per year in taxes based on current tax tables. This is just on federal income tax alone. Not to mention Social Security taxes, state taxes, etc. If you are in the 35% tax bracket if you decide to let your corporation earn $100,000, you can save $17,550 every year in personal federal income taxes.
Also, more and more people today are being hit with the Alternative Minimum Tax, which wipes out personal deductions. This tax that was once only the concern of the very rich is now affecting people earning less than $80,000. Using the correct corporate strategy, this problem may be eliminated.
No State Taxes on Profits
Federal taxes (including income tax, social security tax, Medicare tax, etc.) typically take 35% to 50% or more of your personal income. In addition, your state may also take a chunk of your personal income. What is your state tax rate? How much of your income did the state take from your earnings on your tax returns last year? If it was any, how would you like to reduce that to zero on certain portions of your income? In Wyoming, there is no state income tax on corporations, so there are no state income tax returns to complete.
Privacy, Anonymity and Lawsuit Protection
Shareholders of a Wyoming corporation are not a matter of public record. Therefore, you can own a Wyoming corporation and you may be the only one who knows that you own it. However, your corporation must be established from the beginning in the proper manner in order to achieve this privacy. When we establish your company, you can have a solid foundation for privacy and anonymity. Your name is not associated with the corporation. With our unique strategies, we can give you the option of never having your name associated with the corporation in the public records.
It is reported that the average person suffers five lawsuits in his or her lifetime. One of which is a killer lawsuit, taking all or most of one's possessions. With more and more lawsuits being filed, there are legal ways to disassociate yourself from the corporation so that hard-earned money is protected from litigation.
More Money
By taking action today, you can have more money, a larger investment portfolio, much lower taxes on profits, outstanding tax-savings on dividends, no capital gains taxes, increased security, less risk and enhanced privacy. But you ask, "I have saved a lot of money and my investments have grown faster, but how can I spend the money on myself?"
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How to Spend the Money
Vacations
Let's say you want to take a vacation that costs you $5000. That vacation actually costs you MUCH more. The $5000 would have been money left over after taxes. You would have to had earned $8000 to $10,000 or more to take that vacation.
But what if your vacation was tax-deductible through your own properly structured corporation? That would mean that your $5000 trip would only cost you $5000! If you travel at all, a corporation can pay for itself many times over. It gets even more exciting. In addition to the tax breaks, did you know that you could actually be paid to travel....tax free? When properly established, your corporation can actually pay you a per diem. Each day you are away from home the corporation can pay you for your living expenses for which the corporation can take a tax deduction and you have to pay no taxes personally. Beware that your corporation must be properly established in order to take advantage of this tremendous benefit and there must be a valid business reason for the travel.
Retirement Security
You can set aside $4000 to $43,000 tax-free in a retirement plan associated with your corporation. The money can grow in the plan tax-free until retirement. In addition, your corporation can match the funds for employees (or one employee if you are operating a one-person corporation). With a corporation, you can actually DOUBLE the tax-deferred income contributed to your retirement plan. There's more. You can also take advantage of a Defined Benefit Plan were you do not have to a set dollar limit. The corporation may be able to make a tax deferred contribution of $100,000 or more every year into your retirement account.
Health Care Deductions
A corporation can deduct 100% of health insurance premium payments.
This benefit gets even better. The corporation can also cover ALL medical costs which the insurance does not cover. This includes, deductibles, co-pays, etc. How much have you spent on dental care, vision, prescriptions, bandages, cough remedies, etc? How would you like this to all be 100% tax deductible? What about massages, chiropractic care, counseling and experimental procedures? How would you like to get these expenses paid for you and your family tax-free through your own corporation?
Insurance
In addition to medical insurance, how would you also like to be able to deduct automobile insurance? Life insurance? These, when properly structured, are available to corporations, with certain limitations.
Tax-Deductible Education for Yourself, Your Children, Your Grandchildren
Do you or any family members plan on going to college? Would you like to buy books, acquire audiocassette programs, travel or attend seminars that can enhance your business skills? Would you like to be able to be able to legally deduct these expenses? How much would it save to be able to deduct just part of your children's college education?
Tax Delay Strategy
A corporation gives you the advantage of an off-tax year end. An individual must have a tax year starting January 1 and ending on December 31 of the same year. You, however, can chose the tax year for your corporation. Let's say you have a corporation established and chose a corporate tax year starting on December 1 and ending on November 30 of the next year. This means that you can move investing profits from yourself personally, for a legitimate business reason, into your corporation some time in December. Let's say you could take a personal tax deduction for moving the money out of your name and into the corporation. And your corporation, barring quarterly reporting, won't have to pay taxes on the income until January more than one year later. Instead of having to pay personal taxes by the end of the year, the taxes are delayed an additional year. If you have stocks, real estate or other investments, you don't have to sell your investments to transfer them to the corporation. You simply sign a transfer form with your broker (or record a quit claim deed for real estate). In addition, during the following year, one can take advantage of the many corporate tax-deduction strategies mentioned above so the corporation may be able to reduce the taxes even further...or avoid taxes on the income all together.
What about double taxation?
Do you want to enjoy the money you have made and saved through you corporation? If you take the money as a dividend that money will be double-taxed. So the answer is simple: don't pay dividends ... ever ... and you won't have to worry about double-taxation. Top investor Warren Buffett's invests through his corporation. His corporation does not pay dividends.
Then how can you get the money? It's simple. Pay yourself a salary or a bonus. Your salary or bonus is a tax-deductible expense to the corporation, so no income taxes are due from the corporation on this money. You simply pay at your personal tax rates.
Keeping the Money Invested
Keep in mind that a corporation is a person; a legal person created by legal statute. That legal person you have created can be operated so it can invest for you and pay less taxes than you. Let's say that you want to change directions and start a new business. You can use the same corporation you use for investing purposes or, more preferably from a liability standpoint, start another corporation. Your first corporation can buy stock in your second corporation to provide it with seed capital to get the business started. What if you want to use some of the money your first corporation has earned to use as venture capital to invest in someone else's business? You have this option as well.
Real Estate
A corporation can also invest in real estate. It can buy single family homes, apartment buildings, commercial property and so on. Say you found a real bargain...a property that you can buy for 60 cents on the dollar. Can you have your corporation buy it. Yes, you sure can. Let's say the real estate market has a big upturn. Can your corporation sell it for a profit? Absolutely, yes. Can the corporation buy a condo in Hawaii, hire a management company, and lease it out by the day or week as a business? Yes. Could the officers of the corporation come to Hawaii and check on and stay for a while in the condo with tax-deductible dollars? Yes.
Buy Toys
What if you decide it's time to relax and enjoy the money that you've made. You have your mind set on an item outside of the investing realm. Say you have your heart set on a new forty-foot yacht? Can a corporation buy such a luxury item? Yes, it can. Can it write off such an enjoyable craft? Well, perhaps, but you would more likely justify it as an investment. We are simply investing with after-corporate-tax dollars. We think that this yacht will go up in value by 35% over the next few years. Many companies make money by buying and selling luxury items such as boats and classic cars. If you think it's something you can make money at, why not enjoy it along the way? We also have a right in this country to lose money on investments. Have you ever lost money on any trades in the stock market or other investment vehicle? Does the IRS allow us do deduct these losses from investment gains? Yes, again.
What else might you want to do? Do you want to pay off your home? Do you want more money to spend?
Here is a link to the IRS's web site that spells out the details of what you can do with employee benefit plans and what the limitations are:
http://www.irs.gov/publications/p15b/ar02.html
Do not implament any tax planning, until you talk to your accountant or CPA on how it may work for you.
*ssi paid on set limits of income.
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