Advice on family business insurance structure

Your plan for structuring your family business and health insurance for 2025 is well thought out and incorporates solid tax-efficient strategies. Let’s review your approach, identify potential gaps, and provide any additional insights:

1. Joint Health Insurance Plan with HDHP and HSA

HDHP with HSA Benefits: Opting for a family HDHP with an HSA is a smart choice for tax savings. In 2025, the HSA family contribution limit is $8,750, not $8,550 as mentioned. You’ll be able to deduct the full amount from your taxable income if you contribute the maximum, lowering your taxable income to $51,250.
Maximizing the HSA's Potential: Since the HSA rolls over annually, any unused balance can grow tax-free, making it a triple-tax-advantaged account. This aligns well with your plan to use it for current healthcare costs (e.g., baby-related expenses) while also letting it grow as a future nest egg.

Note: Ensure the HDHP you select is HSA-eligible. Some plans may not meet all IRS requirements for deductibles and out-of-pocket maximums.

2. Business Income Allocation

Shifting Your Wife’s Income to $0: While it simplifies taxes, having her take no salary eliminates contributions to her Social Security and Medicare benefits. If she has no other income sources, consider whether this could impact her long-term retirement benefits.
Alternative Approach: Instead of entirely eliminating her income, you might consider paying her a minimal salary (e.g., $10,000), which would keep her Social Security earnings record active. The business can still deduct the expense, and you would retain her eligibility for future benefits.

3. Tax Filing and Deductions

Filing Jointly: Filing jointly at a $60,000 income level will likely keep you in a favorable tax bracket, especially with the standard deduction for married couples in 2025 projected to be around $28,000. Your taxable income would be approximately $32,250 after deductions, keeping you in the 12% federal tax bracket (if unchanged for 2025). This is an efficient tax structure.

4. Potential Considerations

Childcare Tax Credits: With a baby on the way in 2025, explore the Child Tax Credit (CTC) and Child and Dependent Care Credit. The CTC provides up to $2,000 per child, subject to income limits, and the Dependent Care Credit could help offset daycare expenses if relevant.
Health Insurance Premiums: You didn’t mention whether the LLC reimburses you for health insurance premiums. Consider setting up a Qualified Small Employer HRA (QSEHRA) if eligible, or an arrangement where the business reimburses health insurance costs for additional tax savings. Consult with a tax advisor to ensure compliance with IRS rules.
Disability Insurance: With both incomes tied to your business, securing disability insurance to cover potential income disruptions might be worth evaluating.

Next Steps

Confirm HDHP Eligibility: Double-check that the selected plan qualifies for HSA contributions.
Reassess Sarah’s $0 Income Plan: Evaluate the trade-off between simplicity now and potential long-term Social Security impact.
Incorporate Upcoming Child-Related Credits: Plan to adjust your tax withholding or estimated taxes in 2025 to account for the baby’s arrival.
Consult a CPA or Financial Planner: For a personalized review of your HSA strategy and business deductions, given your self-employed status.

Conclusion

Your plan is solid and demonstrates excellent foresight. The use of an HSA and family HDHP is highly efficient, and filing jointly keeps your taxes manageable. Consider tweaking your wife's income to maintain her Social Security benefits and exploring child-related credits for additional savings. Regularly reviewing your strategy with a professional will ensure everything remains optimized as your family grows and needs evolve.