Dental Coverage for the Self Employed
One of the key benefits of using Olympia’s Plan TWO for sole proprietors is unrestricted dental coverage. With traditional dental insurance plans, major dental work such as orthodontics, crowns, bridges and root canals are very restricted in how much they are covered.
It is common for expenses such as orthodontics to be restricted to only $1,500 for the entire lifetime of a plan holder, which barely even scratches the surface for covering orthodontic costs. Using an Olympia Health & Dental Plan, you will become eligible to deduct 100% of your dental costs – including braces – up to your annual deduction limits without any restrictions on specific expenses.
Following are examples of common dental expenses that are submitted through Olympia Benefits. Please note that in addition to major dental work, regular dental maintenance such as teeth cleaning and dental checkups are also fully eligible.
Deducting crowns, bridges and root canals
The bad news is that dental work is expensive. The good news is that using Plan TWO those big dental bills become tax deductions.
If you have been to the dentist lately and been told that you “need some work done”, there is a good chance you are looking at a $1,000.00 bill to get things started. If you do not have an Olympia Health & Dental Plan in place, you will need to earn approximately $1,600.00 in income (at a 40% tax rate) to cover the expense. ($1,600.00 minus 40% income tax = approximately $1,000).
As an alternative to paying $600.00 in unnecessary tax, you can pay a small $100 administration fee to Olympia (10% of the $1,000.00 dental bill). By signing up for Plan TWO, you will be able to save $500.00 on the dental bill!
Deductions for Braces / Orthodontics
Plan TWO gives self employed business owners the chance to use braces as a valuable deduction for their business. With braces typically costing between $5,000 and $7,000 – this is a significant opportunity for a tax deduction.
Assuming a $6,000 orthodontics bill – with payments spread out over 1 ½ - 2 years:
Without an Olympia Health and Dental Plan, you would need to earn close to $10,000.00 in income to cover this cost when you include the income tax that has already been paid! The only potential tax savings would be on the Medical Expense Tax Credit, which is typically very ineffective for high income earners.
With an Olympia Health and Dental Plan in place, the total cost would be $6,600. It would only cost the amount of the orthodontics bill plus a 10% administration fee. Plus – you now have $6,600 worth of deductions for your business.
How did we calculate these savings?
Personal income of $10,000 (at a 40% tax rate) would leave $6,000 “after-tax” to pay for this expense.
Alternatively, you can have your business pay for the expense ($6,000) plus a 10% administration fee ($600) and deduct the entire cost as a business expense.
* Please recall from the Plan TWO homepage – annual deduction limits are set by the government and restricted to $1,500 per year for family members 18 years or older, and $750 per year for members under 18 years of age – combined into a family total. For significant dental work such as braces, please contact Olympia Benefits for payment options to maximize your deductions.
What if I already have dental insurance in place?
Dental insurance companies will typically cover a small portion of major dental work (often 50%) and in most cases there will be annual limits and/or lifetime limits placed on specific types of expenses. Many insurance plans have a $1,500 lifetime limit on braces. So even if you have a health and dental insurance plan in place, the majority of the cost will still not be covered. This uncovered portion would be an eligible expense for the Olympia Health and Dental Plan.
Example:
| Total cost for braces: | $6,000 |
| Insurance coverage: | $1,500 (50% of bill up to $1,500 maximum) |
| Uncovered amount: | $4,500 (eligible for the Olympia Health and Dental Plan) |
In this situation, there is a $4,500 dental bill remaining after the insurance company has paid their portion. There are really only two options:
- Pay for the expense personally and use the Medical Expense Tax Credit (usually very ineffective)
- Use Olympia Benefits Plan TWO to create a full deduction for the braces – $4,950 worth of deductions.
If you need to pay the bill anyway, it makes much more sense to run it through your business.
When you add up annual health and dental costs for your family you may be surprised at how much you actually spend. As a result, it is common for business owners to save thousands of dollars every year using Olympia Benefits.
