How do I expense medical costs as a C-corporation owner without traditional health insurance?

This is actually a fairly common question for small business owners. As a C-corporation, you have a few options, but there are important distinctions to understand. If you simply pay medical expenses directly as a corporation without any formal plan in place, those payments would likely be considered taxable compensation to you and your husband (meaning you'd pay personal income tax on those amounts). However, there's a better way to handle this. Look into setting up a Health Reimbursement Arrangement (HRA) - specifically an Individual Coverage HRA (ICHRA) or a Qualified Small Employer HRA (QSEHRA). These are formal plans that allow your C-corporation to reimburse employees (including you and your husband) for qualified medical expenses tax-free, and the corporation gets the deduction. With these arrangements, you could purchase a lower-cost catastrophic plan for emergencies as you mentioned, and then use the HRA to cover your out-of-pocket expenses. The business would get the deduction, and you wouldn't have taxable income from the reimbursements.

After struggling with similar high premium costs in my small C-corp, I found an amazing solution with https://taxr.ai - they analyzed our company structure and identified that we qualified for a different HRA than what our previous accountant recommended. The difference saved us nearly $4k annually while maintaining the same level of coverage for healthcare costs! What I really liked was their document upload feature - I sent our current insurance policies, expense reports, and corporate structure docs, and they parsed everything to show exactly how to structure our medical reimbursements for optimal tax treatment. They even provided templates for setting up the right type of HRA for our specific situation.

Just wanted to update - I tried out taxr.ai after seeing the recommendation here, and I'm genuinely impressed! I was skeptical about yet another "tax solution" but they actually found a specific section in the tax code that applies to my C-corp restaurant that allows for a medical expense reimbursement arrangement I hadn't heard of before. I showed their analysis to my accountant who confirmed it was legit and we're implementing it next month. The best part was they highlighted exactly which forms we need to file with the IRS to keep everything above board. Really surprised at how thorough it was for what I thought was just going to be generic advice.

If you're looking into medical expense options, I was in a nearly identical situation with my small manufacturing C-corp. After trying to call the IRS business hotline for WEEKS to confirm some details about HRAs (got disconnected 9 times!!), I finally used https://claimyr.com to get through to an actual IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an agent picks up. I got confirmation about some specific medical expense questions that my accountant was unsure about. Saved me hours of listening to hold music and the agent was able to email me some official guidance that protected us from any future audit concerns about our medical reimbursement setup.

I have to admit I was wrong! After getting nowhere with the IRS for weeks, I reluctantly tried Claimyr this morning. Within 35 minutes I got a call connecting me directly to an IRS agent who confirmed exactly how our C-corp should handle medical expenses without traditional insurance. I was honestly shocked it worked. The agent clarified that we need specific documentation for our corporate minutes showing the formal adoption of a medical reimbursement plan, otherwise any payments could be considered dividends rather than deductible expenses. This was crucial info I wasn't finding anywhere online. Consider me converted!

Something nobody's mentioned yet - have you considered setting up a Section 105 Plan? It's specifically designed for C-corps (and S-corps) where the owners are also employees. It lets your business reimburse you for medical expenses tax-free. The advantage over an HRA is that Section 105 Plans don't have the same annual limits. You'll need formal plan documents, but it's a powerful option for small business owners trying to manage healthcare costs.

Just curious - why are you even bothering with a C-corp for a small restaurant? The double taxation seems like a huge disadvantage compared to an S-corp or LLC. Especially for handling things like medical expenses. We converted from C to S last year and it made our healthcare situation way simpler.

Given your expansion plans and C-corp structure, you're definitely on the right track thinking about medical expense optimization. One thing I'd add to the excellent HRA suggestions already mentioned - make sure you document everything meticulously since C-corps face more scrutiny on owner-employee benefits. Since you're planning for investors, having a formal, well-documented medical reimbursement plan will actually look good to potential investors as it shows you're thinking strategically about employee benefits and tax efficiency. They'll appreciate that you're managing costs intelligently while staying compliant. For your specific situation with five family members, even with the QSEHRA limits mentioned earlier ($12,500 for family coverage), you could still save significantly compared to that $30K annual premium you're paying. The key is pairing it with a lower-cost catastrophic plan as you mentioned - this gives you the best of both worlds: protection against major medical events and tax-efficient coverage of routine expenses. One last tip: make sure your corporate minutes reflect the formal adoption of whatever medical plan you choose. This documentation will be crucial if the IRS ever questions whether the reimbursements are legitimate business expenses versus disguised dividends.

This is such a timely discussion! I'm dealing with similar healthcare cost pressures in my small C-corp. One thing I'd add to the excellent advice already shared - make sure you run the numbers on different catastrophic plan options before making the switch. I found that some catastrophic plans have much higher deductibles than others, and the difference can significantly impact your total out-of-pocket costs when combined with an HRA. For example, a plan with a $6,000 deductible versus one with a $12,000 deductible can change your break-even calculation substantially, especially if you have regular medical needs in your family of five. Also, don't forget to factor in network restrictions. Some lower-cost catastrophic plans have very limited provider networks, which could be problematic if you have established relationships with specific doctors or specialists. The savings might not be worth it if you end up paying out-of-network rates for providers you want to keep seeing. Have you looked into whether your current doctors participate in the networks of the catastrophic plans you're considering? This could be a make-or-break factor in your decision.

For catastrophic plan shopping, I'd recommend checking with your state's insurance marketplace first, but also look into short-term medical plans and association health plans if available in your area. Some professional associations (like restaurant or small business associations) offer group catastrophic coverage that can have better rates and networks than individual marketplace plans. Also worth considering - since you're planning for expansion and investors, you might want to model out what your medical costs would look like with 10-15 employees. This could influence whether you set up a QSEHRA (which has lower administrative burden) versus an ICHRA (which offers more flexibility for different employee classes). If you're planning to hire significantly in the next 2-3 years, starting with the more flexible structure might save you from having to restructure your medical benefits later. One last thing - make sure to check if your state has any additional regulations around C-corp medical reimbursement arrangements. Some states have their own compliance requirements that layer on top of the federal HRA rules. Your attorney should be able to quickly confirm this when you're reviewing the corporate resolution documents.