Before you close the books on 2025, make sure you’re not leaving health-plan tax savings on the table
If you’re a small-business owner with 1–49 employees, a health plan (or a smart reimbursement alternative) isn’t just a “nice to have.” It’s a retention tool, a tax strategy, and handled correctly a meaningful way to put real dollars back in your pocket before December 31.
Even though the tax law doesn’t require employers under 50 full-time equivalents to offer group health insurance, there are multiple ways to provide health benefits tax-efficiently. Below are five year-end moves we’re discussing with clients right now. If any of these apply to you, there may be deductions (or credits) you can still lock in for 2025.
Big Picture: The 5 Opportunities to Review Now
- Reimburse your 2025 Section 105 HRA expenses before year-end.
- Finalize and reimburse your 2025 QSEHRA.
- Finalize and reimburse your 2025 ICHRA.
- Make sure your S-corp health insurance deduction is done correctly.
- Claim the Small Business Health Care Tax Credit if you offer group coverage.
Let’s walk through each quickly, what it is, why it matters, and what to do before the calendar flips.
1. Reimburse Section 105 HRA Expenses Now (Owner + Spouse Employee Setups)
If you’re a sole proprietor (Schedule C) and your only employee is your spouse, you may be eligible for the powerful Section 105 HRA family plan. This setup can allow the business to reimburse family medical expenses tax-free to you and deductible to the business, while being exempt from most Affordable Care Act rules when structured properly.
Year-end action:
If you already have a Section 105 plan in place, make sure all 2025 medical expenses you intended to reimburse are actually reimbursed by midnight on December 31, 2025. If reimbursements don’t occur in 2025, the deduction doesn’t either.
Pantana CPA tip:
If you’ve been reimbursing sporadically, catch up now and then move to a monthly reimbursement rhythm in 2026 so nothing slips through the cracks.
2. Reimburse QSEHRA Expenses Before December 31
For employers with fewer than 50 employees who aren’t offering a traditional group plan, the Qualified Small Employer HRA (QSEHRA) is often a sweet spot: flexible for employees and tax-friendly for owners.
2025 reimbursement caps:
- $6,350 for self-only coverage
- $12,800 for family coverage
These amounts can reimburse employees for individual premiums and eligible out-of-pocket medical costs.
Important timing rule:
To start a QSEHRA on January 1, employees generally must receive written notice 90 days before the plan year begins. Late notice can trigger a $50 per employee penalty, though enforcement requires an audit.
Year-end action:
- Reimburse all qualified 2025 expenses before December 31.
- If you want a QSEHRA for 2026 and haven’t implemented it yet, get it drafted and employee notices out now.
3. Consider (or Catch Up on) an ICHRA Before Year-End
An Individual Coverage HRA (ICHRA) works for businesses of any size and allows reimbursements for individual insurance premiums and other qualified medical expenses, as long as the employee has individual coverage.
Why some owners prefer ICHRAs over QSEHRAs:
- No statutory reimbursement cap (you set the allowance)
- More design flexibility by employee class
- Works even if your company grows beyond 50 employees
Year-end action:
If you already offer an ICHRA, double-check that reimbursements for 2025 expenses are processed by December 31.
Pantana CPA tip:
If you’re planning to help employees more aggressively in 2026, talk with us about whether an ICHRA gives you a better long-term runway than a QSEHRA.
4. S Corporation Owners: Get the Health Insurance Deduction Right
If you own an S-corp, your health insurance deduction is only “above-the-line” (i.e., fully deductible on your 1040) if two things happen:
- The S-corp pays for or reimburses the premiums, and
- The premiums are included on your W-2 as taxable wages (but not subject to payroll tax).
Miss either step and you lose the clean deduction ending up in itemized-deduction land where the 7.5% AGI floor can wipe out most of the benefit.
Year-end action:
- Run any missed 2025 premiums through payroll now.
- Confirm the total is on your W-2 before year-end.
5. See If You Qualify for the Small Business Health Care Tax Credit
If you provide group health insurance through the SHOP Marketplace, you may qualify for a credit worth up to 50% of the premiums you paid for employees (35% for nonprofits).
Key eligibility rules:
- Fewer than 25 full-time equivalent employees
- Average wages generally under about $56k (inflation-adjusted; phaseouts apply)
- You pay at least 50% of employee-only premiums
- Credit limited to two consecutive tax years
Year-end action:
- If you started group coverage in 2025, we’ll evaluate the credit on your tax return.
- If you were eligible in prior years but didn’t claim it, you may be able to amend those returns.
Pantana CPA reality check:
The credit is generous but temporary. Make sure group coverage still makes economic sense after the credit sunsets.
Quick Takeaways
Before December 31, 2025, make sure you’ve checked these boxes:
- Section 105 HRA: reimburse 2025 expenses now to capture deductions.
- QSEHRA: confirm 2025 reimbursements and set up 2026 properly (limits: $6,350 / $12,800).
- ICHRA: consider it for more flexibility and no reimbursement cap.
- S-corp owners: premiums must run through payroll and hit the W-2.
- Group plan credit: check eligibility for up-to-50% premium credit.
👉 [Schedule a consultation today] to plan your 2025 Year-End Tax Deductions
