My husband works outside our home. He also helps me in my business. He has health insurance coverage there that covers our entire family. He pays part of the premium. His ER does not have a Flex Plan so the premiums can’t be pre-taxed. Can we use a MERP?by Tom Luker on 05/01/15
Yes. It doesn’t make any difference who is the “named insured” for the insurance as long as it isn’t already pre-taxed [you can’t “double dip.”]
We’ve worked with many Home Child Care Providers whose spouses do a lot of work in the business [like farmers] and even direct selling representatives [such as Mary Kay Consultants] whose spouses are helping to put together promotional packages, traveling to sales conferences, etc.
- Also, Long Term Care [LTC] insurance is included for Sec 105 whereas it isn’t with a Sec 125 plan [currently].
- Other types of insurance that can be included in most Sec. 105 plans [including TLC’s] are Term Life Insurance [on the EE, up to $50,000 coverage,] Dental, Vision, Hospital, Cancer, Accident and Disability Income [on the EE, but if benefits are paid, the income is subject to taxation.]
- Even Health Savings Account [HSA] deposits can be included as a “business expense” rather than on the front of the 1040. Thus the HSA sort of acts as an added retirement plan if the account does not have to be totally used for OOP expenses. This can be very important to high-income business owners and is free from the evil machinations of the Alternative Minimum Tax [AMT], which tends to surprise hard-working self-employed persons who don’t even consider themselves to be in the “top 5%.”
- For further info about the AMT see the Center on Budget and Policy Priorities, “Myths and Realities about the Alternative Minimum Tax." Be sure to consult your tax professional for this and other items.
- My understanding of the AMT is that it’s a special additional tax levied to taxpayers over a certain amount of A.G.I. It impacts those who have a lot of itemized tax deductions, investors with capital gains, parents with several children, business owners and landlords. Those who have been impacted by the AMT or who might be, are very much aware of the AMT. It’s sort of a “gotcha” tax.
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