Tax Savings Plan Frees Untapped Investment Capital

Saville, Anita
August 1997
Journal of Financial Planning;Aug1997, Vol. 10 Issue 4, p67
Academic Journal
This article discusses how a tax savings plan frees up untapped investment capital. Section 105 tax-savings plan is an often overlooked U.S. Internal Revenue Service (IRS) code allowing self-employed business owners to deduct 100 percent of family health care costs--including insurance premiums, as well as non-insured medical, dental and vision care expenses. Like most business deductions, Section 105 plans require strict adherence to IRS codes plus those set by the U.S. Department of Labor and Employee Retirement Income Security Act. For this reason, tax professionals recommend using a third-party administrator such as BizPlan to insure proper compliance. Although the administrative requirements are complex, the business owner's ability to qualify for Section 105 deductions is quite simple. In fact, many may already be entitled to these savings. Clients who fit the following profile are the best candidates for the program. They must be self-employed, have no more than three employees, and must have a spouse who is active in the business, even on a part-time basis. By making the spouse a formal employee of the business, Section 105 benefits can be offered as employee compensation that is fully deductible by the employer.


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