Can a Fitness Coach deduct their medical expenses?
“I fully understand my medical insurance.” - Nobody Ever
Jane runs an online fitness business and buys her own health insurance. She pays $6,000/year or $500/month for her medical premiums. She ran up another $3,000 in medical expenses from doctor visits and prescriptions.
After handing her accountant the $9,000 medical expenses, Jane found out that her $3,000 medical expenses are NOT deductible.
“Why not?” She asked.
EXPLANATION OF SCENARIO (POTENTIALLY BORING):
Jane’s business made $300,000 in net profit after all expenses in 2019.
In 2019 & 2020, you can only deduct expenses OVER 7.5% of income…so for Jane that equals expenses OVER $22,500 ($300,000 x 7.5% = $22,500). So her $3,000 + $6,000 is only $9,000.
To further complicate it...the $6,000 IS deductible because that is the premium. Jane is self-employed so that is a deductible expense that will help lower her tax bill.
HOW CAN WE HELP JANE DEDUCT THE $3,000?
Luckily, Jane is working with a financial professional that understood both taxes and medical insurance!
In 2019, Jane was advised of the advantages of a Health Savings Account (HSA).
An HSA allows you to save money and take a deduction for it (only to be used for qualified medical expenses). Similar to the popular FSA (Flexible Spending Account)…except with an HSA, the money is yours forever.
With that HSA...Jane is allowed to contribute $3,500 in 2019 ($7,000 if she had a family).
CONTRIBUTION DEADLINE IS APRIL 15 2020 FOR HER 2019 TAX YEAR!!
Jane can now put $3,500 into her Health Savings Account for 2019 which would allow her to fully deduct the $3,000 in medical bills.
Jane kept the same plan in 2020, so she can now add $3,550 for this year.
Despite having a high business income, Jane was able to maximize her the tax benefit for her medical insurance!
ACTION ITEMS FOR YOU:
Check if 2019 you had a Health Savings Account (HSA) Medical Plan
Did you maximize your contribution limits?
If possible, do so before April 15th 2020
WHY DOES AN ONLINE FITNESS COACH WORK WITH A COMPREHENSIVE FINANCIAL PLANNER?
For Jane, the value is much more than "picking investments".
A financial planner can help reduce the time and stress on these types of decisions, so that you can focus on your clients and business you love!
Best
Pat
(Disclaimer: This is meant to be education and not advice for your specific situation. Please consult a qualified professional before making any changes to your health insurance or tax savings strategies.)