Small business owners are constantly looking for legal tax deductions to lower their taxes. A recent federal court of appeals decision has provided a road map on how small business owner’s can deduct 100% of their family medical expenses with the use of a section 105 medical reimbursement account.
Typically business owners can only deduct 100% of their medical insurance. However a section of the tax code allows a business to pay for all of its employees medical expenses, expenses that are fully deductible to the business. So the “loophole” was to hire your spouse as an employee and then draw up a medical reimbursement account to pay for all of their medical expenses.
Voila! 100% of medical expenses were now tax deductions to lower their taxes.
For some reason the IRS is still fighting a losing battle against this tax planning and were handed another defeat in federal court.