Healthcare for one, please
We see it in the news every day - healthcare. It’s particularly important when you’re a business owner and have to rely on yourself for healthcare access. We outline below some ways to maximize your health coverage options and tax free savings through your business.
Click here to learn more about Health Plans related to healthcare.
When you’re a business-of-one, getting health coverage can be complicated and difficult. For most of you, you’re probably going through the government or maybe you’re able to access employer-sponsored healthcare yourself from a previous position or via your spouse.
Unfortunately, most businesses with only owner-employees do not qualify to secure group plans from an insurance broker. If you find yourself in the position that your S Corp’s only employees are you, your spouse, and/or other family members, then you’ll likely not be able to sign up for a group plan. If this is the case and you have no other access to healthcare, your best bet is probably the Healthcare Marketplace (https://www.healthcare.gov).
If you’re considering contracting a US-based person or perhaps acquiring a partner or scooping up a new investor, have you thought about hiring them as an employee? The reason we ask is because this would add to your business a non-owner/non-family member employee and potentially give you both access to a group insurance plan. Check out SHOP (Small-business Health Options Program) https://www.healthcare.gov/small-businesses/get-coverage/) for the specifics. Of course there are a number of factors to consider when making hiring decisions, but if you’re on the fence healthcare just might be the reason that tips the scales.
Health Insurance Premiums
You probably remember from your employment days that you received health coverage from your employer tax-free… well at least the premiums were tax-free. The portion your employer contributed to your premiums was not counted in your taxable income and the portion you contributed was deducted from your paycheck before taxes. If you were really lucky, your employer would cover the full costs of your premiums, giving you health coverage free of tax and FICA (Social security and medicare tax).
Why not put the same method to work with your S Corp? You’re an employee, and I hear your employer is a really generous person who wants to make sure you and your family have great coverage. ;-) If you’re paying for your own health insurance coverage, make sure your business is paying those premiums as employer contributions and you’re reporting it as a non-taxable employee benefit in Gusto.
One thing to note is that your health insurance doesn't need to be in your S Corp's name. When you apply for health insurance, you'll find it easiest to apply using your own name as the S Corp owner. Most states don't allow S Corps with only one owner to have a group health insurance policy, so the IRS is cool with an S Corp paying an owner's health insurance premiums. Then, all you have to do is have your S Corp pay the premiums out of your business checking account or credit card and set this up to run through Gusto (great news - we will help you with this!). Once you do this, you're all set and ready to go!
Health Savings Accounts (HSA)
Another great tax-free health benefit is Health Savings Accounts. These are plans that allow you to set aside tax-free money each year to spend on your health-related needs. There are some restrictions, for instance, you have to be covered by a High Deductible Health Plan (HDHP) and there are limits to the tax-free amount you can contribute to these plans.
If you did secure a HDHP through the Marketplace, and want a little extra security for health costs while saving some tax, then consider opening an HSA. Maximum contribution amounts for 2020 are $3,550 for self-only and $7,100 for families. The annual additional “catch-up” contribution amount for individuals age 55 or older remains $1,000.
Use personal HSA's paid through your personal account. Don’t run this through payroll nor include as an expense of your S-corp.