Financial Strategy
Financial Strategy
tax savings . To help in doing this , I will need to explore the various types of health insurance plans and explain the three IRS approved methods of deducting medical expenses .
The Five Types of Medical Insurance
The first thing you need to know is that there are five major classes of medical insurance plans available to business owners and their employees . They are : eliminate all the medical expenses paid throughout the year resulting in no tax savings .
Unfortunately the only avenue provided by the IRS for the average working person ( employee ) to use to deduct health care costs is the Schedule A . However , since only the amount of medical expenses greater than 7.5 % of a person ’ s adjusted gross income is actually deductible , it turns out that less than 3 % of all taxpayers who itemize using a Schedule A will ever see any tax savings from the deduction of their medical expenses .
The Business Owner
An important point to remember is that the Government uses the tax code to encourage people to do what the Government wants done . As an incentive to start a business , the IRS code provides business owners certain special tax breaks not available to the average working person . The good news is that one of these special tax breaks is the ability for a business to actually deduct all medical expenses ! This ability to deduct 100 % of medical and health care costs is a tremendous advantage and in some cases can result in sizable tax savings .
With a tax code consisting of many thousands of pages , simple things tend to become very complicated . I will do my best to try and simplify the sections of the tax code dealing with the deduction of medical expenses and where possible point out the available
1 . Cobra Insurance Coverage : This is a government program that allows an individual to maintain the group insurance coverage once provided for him by a previous employer . The drawback is that the individual must pay the entire cost of this coverage . This type of policy is the most expensive form of health insurance . Normally it is temporary while the individual is searching for a new job . This type of coverage is usually only used in desperate circumstances .
2 . Big Company Group Insurance : This is the second most expensive type of insurance because the insurance company usually must take all employees regardless of their health . These plans usually have low deductibles .
3 . Independent Individual Insurance : This is the third most expensive . The health of the individual will be looked at when developing a premium . They usually also have low deductibles .
4 . High-Deductible Company Group Insurance : This is the fourth most expensive as the insurance company usually must take all employees regardless of their health . The high deductible creates lower premiums .
5 . High-Deductible Independent Individual Insurance : This is the most affordable type of insurance . It is especially great for those who are healthy . This should always be applied for when searching for insurance and considered an option .
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