Kelsey has owned and operated a small consulting business in Dallas, Texas, since 1996. His wife, Stephanie, helps with billing, filing and other aspects of the business. Prior to 2008, Kelsey did not pay Stephanie on a formal basis. During 2008, Kelsey and Stephanie paid non-reimbursed medical cost totaling $4,356, including health insurance premiums, insurance co-payments, orthodontist's bills and prescription drugs, etc.

On January 1, 2009, Kelsey adopted the Kelsey Ryan Consulting Medical Reimbursement Plan. He hired Stephanie as a W-2 employee at $15 per hour. Stephanie was his only employee and was covered under the plan. The plan called for the reimbursement of out-of-pocket medical expenses of up to $6,000 per employee per year. The plan was written, was given to every employee and was non-discriminatory. The cash reimbursements are not taxable income to Stephanie but represent a tax deduction to Kelsey's company. The bottom line: Kelsey's tax return included $4,356 in deductible expenses that he would not have had without the plan. Total net savings: $2,017!