Can sole proprietors use StretchDollar?

Ultimately, the answer depends on whether you have W-2 employees, or expect to hire any soon.

StretchDollar offers ICHRA group health plans designed for small businesses. (ICHRA stands for Individual Coverage Health Reimbursement Arrangement.) Sole proprietors are considered self-employed individuals for tax purposes and aren't eligible for ICHRA. The reason they are ineligible is because they can already deduct their health insurance premiums directly on their personal tax return, and in a more tax-advantaged way.

Important too — taking the pre-tax deduction and accepting the ICHRA pre-tax health benefit would be like double dipping on tax advantages. The IRS could flag that and make you pay additional taxes and possibly a penalty.

However, if you have W-2 employees (even just 1) or expect to hire some soon, your employees would be eligible for StretchDollar health benefits. So you can still reduce your businesses' taxable income by setting up a StretchDollar benefit plan for your employees and reimbursing them each month.

Best of all — if you have employees and offer them StretchDollar health benefits, our team of licensed insurance brokers can still help you (in addition to your employees) shop for and enroll in a marketplace health plan.