How do you write off medical expenses? It used to be you could use a cafeteria plan to pay for medical expenses pre-tax. The Affordable Care Act of 2010 limited the amount you could pay that way. That left itemizing deductions, which are limited based on your adjusted gross income.
There is one more solution, but you need to have a business and it needs to be in the right structure.
If your business is in a C Corporation or if you’ve got a Schedule C where one spouse own the company and employs the other, you can have a Medical Expense Reimbursement Plan (MERP.) A MERP allows you to write off 100% of eligible medical expenses against your business income.
The rules again:
- Must have a business
- Business must be in a C Corporation or Schedule C
- If Schedule C, one spouse owns the company and the other spouse is employed by it. If you’re not married, it won’t work.
- Must have a written MERP
- Must have receipts for eligible medical expenses
Here’s a question we received regarding a MERP. “If my spouse works for two firms as a W2 employee, can she get her medical insurance from firm A (external firm) and have a MERP in firm B (my firm)?”
Answer = yes, as long as you meet the rules above.