The Section 105 HRA is not actual magic, but what it can do for small business owners is magical. This HRA helps businesses go beyond the standard deduction and save thousands of dollars each year. With just the flick of a wand (or a click of a mouse to submit eligible medical expenses with BASE®), a client could save, on average, $5,900 in tax savings.
The Section 105 Health Reimbursement Arrangement is an IRS-approved health benefit that allows self-employed individuals to employ their spouse, who is active in the business, and reimburse, tax-free, eligible health care expenses for the employee, spouse, and their dependents.
The BASE® Section 105 HRA is a tax savings plan that allows small business owners the opportunity to deduct up-to 100% of health care costs, including insurance premiums and qualified out-of-pocket health care expenses as a business deduction.
Let’s see how the magic works with a real-life example >>>
Tom is the sole proprietorship. His wife, Anna, provides valuable services to the business such as bookkeeping and more. Through the advice of his financial planner, Tom decides to enroll in the Section 105 HRA with BASE®. Tom talks to a Sales Rep with BASE® and they put a compensation plan together for Anna, and Tom and Anna start saving valuable tax dollars right away.
ABRACADABRA…and the wave of a magic wand… MAGIC HAPPENS. Because Tom files his taxes as a sole proprietor on Schedule C of the Form 1040 going beyond the standard deduction, making the savings with the BASE® Section 105 HRA purely magical. By turning Tom and Anna’s health care expenses into a tax-favored business deduction, they can offset income and self-employment taxes.
The BASE® Section 105 HRA is a great method of increasing tax savings for a wide variety of small businesses, such as the farmer, self-employed business owner, and more. Business structures that qualify are sole proprietors, partnerships, C Corporations, and S Corporations. When businesses enroll in the BASE® Section 105 HRA, the employers have access to a comprehensive tax-advantaged health benefit plan with reliable service and support, reducing the financial impact of health care expenses and paying for eligible out-of-pocket health care while paying no taxes on reimbursements.