HRA plans have great value in Delaware - Part 2

Health reimbursement accounts are great for certain self-employed persons in Delaware who meet the following criteria:

• No employees
• Have no insurance or significant out of pocket medical expenses in spite of insurance

A health reimbursement account can be set up to enable 100% above the line deductions of medical  costs which would otherwise be deducted oin schedule A to they extent they exceed 7.5% of AGI - if you can itemize. Depending on your federal and state tax rates, the break even point for covering the nominal annual admin fee may be as low as $1000 in costs.

Sole-proprietors/partnerships/LLCs will need to initiate employment of a non-owner spouse/s in order to take advantage of this program. Adding the hassles of payroll filings to the mix may negate the benefits of this plan unless medical and medical insurance expenses exceed $3000-$4000/year.

S-corp owner/operators are required to pay themselves wages so payroll will already exist in most cases. Reimbursements are deducted by the corp in the same manner as health insurance premiums - as wages not subject to FICA taxes. The above the line deduction on the 1040 washes out the income at the personal level.