We are a C-corp and we no longer have health insurance. Instead we have a cafeteria plan which fully covers 100% of employee medical expenses.
We would like to create an account which we contribute into each month to form a medical reimbursement fund. All medical reimbursements would then come from this account.
Fundamentally, instead of wasting money every month on Health insurance, which is fully deductible to the Corp, we want to deposit what would have been spent on health insurance into this medical reimbursement account.
How can we structure this account so that all deposits into this account are fully tax deductible to the Corp?
Answer :
As long as it doesn't result in excessive compensation issues, or in the unlikely event a salary needs to be capitalized, a corporation can deduct as a medical expense the reimbursement of employees individual medical insurance premiums. A C-Corp enjoys a full deduction for the cost of employees’ including owner employees’ health insurance, group term life insurance of up to $50K per employee, and even long-term care premiums without regard to age-based limitations; the C-Corp can also deduct the costs of a medical reimbursement plan. If you have a lot of medical expenses that aren’t covered by insurance, the C Corp can establish a plan that results in all of those expenses being tax deductible, and deduct it as an employee benefit expense. It matters not if there is only a Single Shareholder for a C Corp. This is in fact rare advantage of a C Corp over a an S Corp.
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