Section 105 Health Reimbursement Arrangement

2 Replies

My wife and I close on the sale of her former home tomorrow and are putting the finishing touches on the legal side of things before we start making offers and bidding at auctions. We will set up an LLC with an S Corp election to use for flipping houses. I'm not quitting my day job, and we have family health insurance coverage through my employer, but we still have fairly high out-of-pocket medical expenses, so I am leaning toward setting up a Section 105 Health Reimbursement Arrangement (HRA) in our LLC to cover out-of-pocket medical expenses with pre-tax dollars. We need to make a pretty quick decison whether to set up the LLC with both of us as owners or whether we need to set it up with my wife as the only owner. As I read the last paragraph of Answer 2 of IRS Notice 2015-17, I think we can both be owners and still get the deduction using a Section 105 plan. I am using a real estate attorney and a retired IRS agent for tax planning, but while I'm waiting on our tax guy's advice, I wanted to see if any of you had already jumped through these hoops. IRS Notice 2015-17

HMM; Good research BUT ...

I recommend focusing on REI and not all the LLC/S-Corp benies, especially when just beginning your REI experience. I am afraid you're reading from the hyped syllabus from "How to get rich quick" and that stuff does not help you make better RE investments.

A corporate meeting in Jamaica would be fun, but they fail to tell you that you need profits from which to deduct the expenses.  You can always add these benefits next year when the Entity is running and producing an income.

I didn't include the details, but we'll be paying about $10,000 in out-of-pocket medical expenses over the next few weeks, so it's worth a few thousand dollars if I can figure out how to pay that with pre-tax dollars.  My question isn't about a get rich quick scheme, it's about exploring an option that is worth a few thousand dollars if I can get it resolved in the next week or three.

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