Are you a married taxpayer? Would you like to learn how to save money on your taxes? Do you have medical expenses? Do you have childcare expenses? Well, if you meet this criteria and you’d like learn how to save money on medical expenses and child care expenses, then this video is for you.
One of the advantages of being a married taxpayer is the ability to hire your spouse. You see, when you do this. When you hire your spouse, you have the ability to established benefits not available to single taxpayers. I think this is just awesome.
If you’re a married person with two children or even no children. You have no employees or you have employees. You could establish this benefits and then your wife take the benefits on behalf of your family. You just pay her like any other employee.
Now one such benefit I like to talk about is a qualified small employer health reimbursement arrangement. It’s called QSEHRA for short. This was signed by Obama in December, 2016. You see, QSEHRA allows for a reimbursement of medical expenses in premiums of up to $5,050 for singles and $10,250 per family. Now, no other plan does this.
Now, with other plans even with the health deduction or the S-Corp, you know, health insurance, you can only deduct your premiums. This is the only plan that allows you to deduct premium and medical expenses. Remember, the only other way you can deduct medical expenses is by itemizing.
But now in 2008 with a higher standard deduction, most people are not even going to qualified to itemize in the first place. And not only that, itemized deductions are subject to 7.5% of your wages… of your adjusted gross income in 2018. Which means, even if you qualify, 7.5% of your AGI (adjusted gross income) is not even deductible. I mean, this is a win-win. This is such a great way to get deductions for your health insurance premiums and expenses, which you have to pay anyway. It’s like you don’t even have to spend the money. But now, you spend the money and you also get a tax benefit as a result.
So, next we’ll see how this plays out. I would like you to me Joe and Sarah. Joe is a small business owner, works very hard. At the end of the year he nets $50,000 for his business, which brings, which means he has a tax liability of $4,731 per year ss a married filing jointly taxpayer. Now, his wife Sarah currently does not work. They have two children but during the day, Sarah’s kids go to school. She’s like, “I have nothing to do I’m bored out of my mind”. And then Joe says, “Come on, come, come work come work. I have some work and you can do some book keeping for me or some paperwork. You know, I have tons of things you can do. So she starts working for Joe. Joe paid Sarah $10,000 gives her a benefit of $10,250 for the QSEHRA. So this brings Joe’s income down to $39,750. Now look at what happened to his tax liability. Rather than paying the $4731, He gets a refund of $886. That’s a $5,617 tax savings. You can see how huge this is. This is really big! I mean, the net amount coming through his home has not changed. The way it comes in has changed, now it, part of it now comes through Sarah who brings it back to the home. He’s already, also paying medical expenses. So why not get the most tax advantage he can get. I mean I think this is just a huge tax savings.
Now, take into account. Just so you know, this this example does not take into account the fact of payroll taxes. But even with that, I mean, you still come out way ahead.
Let us talk about child care expenses. When you have children you probably have to take them to daycare or after school programs. You’ve probably heard by now that the tax code does allow your credit for paying for childcare. However, this credit is zero when your spouse does not work. If you have a non-working spouse who often has to get child care because they have to help in the business. For example, an example of Bob, Joe and Sarah. Let’s say Joe gets really busy in his business. And Sarah now has to start working, even when it’s time to pick up the kids. And so because of that they have to do after school care. Paying her to work in your business also helps you. Because if she’s not working and she’s not getting paid then she can’t even take this credit. Also, if you have a spouse that works somewhere else. It might be better for her to, for him or her to work for you in your business because what happens is that income he or she gets from somewhere else would put you above the threshold. Meanwhile they work for you, you’ll still be below the threshold to get certain credits.
So, let’s take a look at an example. So, looking at Joe still making $50,000 on wages, on sorry, self-employed income. The only difference here is here he paid his spouse. And here he did not pay his spouse. Now, I’m removing all other considerations. The only thing I’m comparing it is the difference based on the difference between the credit he can claim. If He spent $3,500 on daycare. So here he spent $3,500 on daycare and he wasn’t able to get the credit. And then, but here he was able to get it because he paid his spouse $10,000. So, that’s a difference of $597.41. It might not seem big, but those little differences do add up. I mean $600 for family that makes $50,000. Maybe that’s a trip they can take with their family? So, this little differences do add up when you really sit down and think into some tax planning.
If you’re interested in this Excel file you can download it by clicking the link below. But in the meantime, just let me know what you’d like me to talk about next. Just leave your comment down there. If there’s any of Bob and you that you like to see me make a video on. Go ahead and leave a comment for me. Also, if you like the content, be sure to subscribe so you get an alert when a new video was posted. And if there’s any general comment you have how I can improve things, you know, go ahead and leave a comment. I look forward to reading your comments. Thank you.
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