Best health care plan for one person sole proprietorship?


A

Alan Meyer

Hello,

I have a sole proprietorship to do computer consulting. I was in
business for decades as a Subchapter S corporation but, for various
reasons, I'm converting to a sole proprietorship.

I'm wondering if there is a good way for me to provide some tax
advantaged health care coverage for myself and my wife.

Here are some of the relevant facts about our situation:

- There is only one employee, me. I've never employed anyone else and
don't intend to for the future.

- I am 66 years old and my wife is 65. We are both covered by Medicare,
which we get through the Kaiser Permanente "Medicare Plus" plan (we've
been with Kaiser for 28 years and didn't want to change) however we
still have to pay Medicare premiums and copays. The total will likely
be between $4,000 and $5,000 for the two of us for next year.

- We live in Maryland and earn our income there.

- I don't know how many years I'll be working. It's a young person's
game. Most of the people I work with are younger than my children. I
fully expect that, one day, the clients will drag me out by the feet and
tell me not to come back. But until then I intend to keep plugging
away. My wife has a very stable counseling business where age is seen
as something of a plus and she'll probably be working longer than me.
So we could use her sole proprietor business as the source for our
health coverage.


I looked at maybe using a Health Savings Account but, according to an
IRS web page I saw, it cannot be used if I'm on Medicare.

Then I looked at a Health Reimbursements Arrangement. It appears that I
might be able to do that if I make my wife the sole owner of the company
and myself an employee. But some states apparently require a minimum of
two employees (I don't know what Maryland requires yet), and I worry
about whether an arrangement like this would be seen as some kind of tax
fraud by the government.

Then there are "Medical Savings Accounts" and "Flexible Spending
Arrangements". I haven't researched them yet.

At this point I'm thinking that someone else, more expert than I am, has
thought about all of this and knows just what is the best thing to do.
So here I am, inquiring.

Does anyone have any suggestions?

Thank you very much.

Alan
 
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D

D. Stussy

"Alan Meyer" wrote in message
Hello,

I have a sole proprietorship to do computer consulting. I was in
business for decades as a Subchapter S corporation but, for various
reasons, I'm converting to a sole proprietorship.

I'm wondering if there is a good way for me to provide some tax
advantaged health care coverage for myself and my wife.

Here are some of the relevant facts about our situation:

- There is only one employee, me. I've never employed anyone else and
don't intend to for the future.

- I am 66 years old and my wife is 65. We are both covered by Medicare,
which we get through the Kaiser Permanente "Medicare Plus" plan (we've
been with Kaiser for 28 years and didn't want to change) however we
still have to pay Medicare premiums and copays. The total will likely
be between $4,000 and $5,000 for the two of us for next year.

- We live in Maryland and earn our income there.

- I don't know how many years I'll be working. It's a young person's
game. Most of the people I work with are younger than my children. I
fully expect that, one day, the clients will drag me out by the feet and
tell me not to come back. But until then I intend to keep plugging
away. My wife has a very stable counseling business where age is seen
as something of a plus and she'll probably be working longer than me.
So we could use her sole proprietor business as the source for our
health coverage.


I looked at maybe using a Health Savings Account but, according to an
IRS web page I saw, it cannot be used if I'm on Medicare.

Then I looked at a Health Reimbursements Arrangement. It appears that I
might be able to do that if I make my wife the sole owner of the company
and myself an employee. But some states apparently require a minimum of
two employees (I don't know what Maryland requires yet), and I worry
about whether an arrangement like this would be seen as some kind of tax
fraud by the government.

Then there are "Medical Savings Accounts" and "Flexible Spending
Arrangements". I haven't researched them yet.

At this point I'm thinking that someone else, more expert than I am, has
thought about all of this and knows just what is the best thing to do.
So here I am, inquiring.

Does anyone have any suggestions?
===============

1) A health savings account cannot be contributed to when you're 65 or over,
but it can be used to pay medical expenses (including your basic medicare
premiums [Parts A-D], but not for a medicare supplemental policy). Archer MSAs
are closed.

2) Medicare qualifies as health insurance for the self-employed health
insurance deduction that is an adjustment to AGI (on the front of form 1040).
 
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A

Alan Meyer

Does anyone have any suggestions?
===============

1) A health savings account cannot be contributed to when you're 65 or
over, but it can be used to pay medical expenses (including your basic
medicare premiums [Parts A-D], but not for a medicare supplemental
policy). Archer MSAs are closed.

2) Medicare qualifies as health insurance for the self-employed health
insurance deduction that is an adjustment to AGI (on the front of form
1040).
Since I never established a health savings account, I take it that your
point 1 above means that I can't establish one now and put money in it,
and so it can't help me with the medicare premiums.

However your second point looks promising. I didn't realize that such a
deduction existed.

Thank you very much for the information and the reply.

Alan
 

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