A Medical Expense Reimbursement Plan with Moneeka Sawyer of the Real Estate Investing For Women Podcast

Craig, we were talking pre show and you were telling me about a Medical Expense Reimbursement Plan. Can you tell us about them and some outside of the box tax deductions available for real estate investors.

The medical expense reimbursement plan. If you do it right, and let’s just say you have kids and they have braces, the government says you could write them off, but you can’t write them off because if you’re making $100,000, the first $7,500 in medical expenses is non-deductible. Hopefully you don’t have that much in out of pocket medical expenses. If the kids need braces, and that’s a six, seven, $8,000 bill, why not be able to write the whole thing off? If you have the right structure, there’s something called the section 105 Medical Expense Reimbursement Plan that lets you write off dollar for dollar.

Home Office

Another thing is a lot of people have home offices. They spend a certain amount of time working out of their home office. If you have a home office, you get write off maybe five percent of your utilities and stuff like that. Not a big number, but it opens the door for travel from your home office to your other office. It opens the door for the home athletic facility, which could be your home gym or your home pool. Those are things. This takes some time. You do some planning, and all of the sudden you have some nice deductions.

Is this true? Do you do taxes in the entire country? I know you live in New York, can you do California also?

We have clients in California or as far away as Oregon. Yes. Some states have their twists and turns. Some states don’t even have any state taxes. The federal is the big one, and we have people that we work with across the country where if I have a question about something in California that I think is unique, I can touch base with them and stuff like that. We have a number of clients in California. California is heavily taxed. If you’re looking at the new tax rate of 37% and the high rate in California is around 13, 14%, you’re looking 50, 51% tax. Every dollar you save in deductions is 50 cents in your pocket. It’s all about keeping more of what you make.

Right, and doing it all legally.

You have to do it legally, and you have to document what you’re doing.

That’s right.

You might be doing it legally. If you’re not documenting it, don’t do it. You have to do both.

That’s great.

Hiring Your Kids

We have people, they hire their kids. There’s a certain set of rules you need to follow. Tax court says, you could hire your kids as young as seven years old. We’re not talking about modeling. We’re just talking about working. I like to tell our clients, “Let’s wait until they’re around 11.” You could get a lot more bang for your dollar. You could pay them a much more reasonable wage, and they do work for you. The money goes into their bank account, just like everybody else’s. Then they either use that to pay for maybe private school, they put it into a Roth IRA. They could save a lot of money. With the new tax law, other than state taxes, a kid could basically make $12,000 before they have to pay any taxes. That’s a lot of money to put away.

If you’re in the 50% bracket between federal state, and you pay your kid $12,000, you saved $6,000 in taxes pretty much.

Wow. That’s amazing, right?

Yes, but you have to document it. Don’t do it if you don’t document it.


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