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Lesson · Business · tax

Make your medical bills deductible.

A Health Reimbursement Arrangement lets your business reimburse your family's out-of-pocket medical costs — a deduction for the business, tax-free to you.

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How it works

How the spousal HRA is built

1
FAMILY MANAGEMENT LLCYou own it. Sole prop or partnership.
2
HIRE YOUR SPOUSEReal role, real work, real payroll.
3
WRITE IT IN THE AGREEMENTSalary plus an HRA as a benefit.
4
REIMBURSE ON RECEIPTSShe pays, submits, company repays.

WORKED EXAMPLE

Six thousand of family medical spend

$6,000 after-tax$6,000 deducted
Zero deductionReimbursed tax-free
Personal cash onlyBusiness expense

Key points

The list is longer than you think

✓
Dental and root canals
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Vision, glasses, contacts
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OTC pain relievers
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Bandages and first aid
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Sunscreen and chapstick
✓
Baby health items

STACKING RULES

HSA and HRA are not the same tool

An account you fundAn arrangement, no account
Needs a high-deductible planNo health plan required
Doctor and hospitalDental, vision, OTC
2025 family cap $8,550Employer sets the cap

Key points

Where people blow this up

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Written plan document
✓
Receipts every month
✓
No pre-hire expenses
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Spouse cannot own the LLC
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S corp owners are limited
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Never reimburse twice

How it works

How the family LLC earns income

1
SHARED SERVICESBookkeeping billed to your other entity.
2
ASSET MANAGEMENTBooking, records, admin for the family.
3
STANDALONE REVENUEIts own product or service line.

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The The HRA field guide — one page

The strategy, the checklist, the key numbers, and links to the actual tax code. Print it, take it to your CPA. Free, no strings.

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Field guide · PDF

The HRA

Cliff notes + checklist + the law

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The law behind it

Primary sources

Verify against the source before you rely on it. This is education, not legal or tax advice.

26 U.S.C. Sec. 105 — Amounts received under employer accident and health plans — the exclusion that makes HRA reimbursements tax-free to the employee.law.cornell.edu/uscode/text/26/105
26 U.S.C. Sec. 106 — Employer-provided coverage under an accident or health plan is excluded from the employee's gross income.law.cornell.edu/uscode/text/26/106
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