• Skip to content
  • Skip to primary sidebar

Header Right

  • Home
  • About
  • Contact

Health Insurance Tax Credit For Small Business

August 26, 2013 by mrice

Tax Tips  are not a substitute for legal, accounting, tax, investment or other professional advice.  Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Health Insurance Tax Credit for Small Business
Small businesses have traditionally been unable to offer health insurance benefits to employees. The primary culprit preventing small businesses from offering this particular benefit was the high costs involved in doing so. The Affordable Care Act, however, has made a few changes that make offering insurance to employees a more affordable option — even for the smallest of businesses. Health Insurance CO-OPs, the Small Business Health Options Program (SHOP), are health insurance tax credits are just some of the changes which are opening the health insurance doors that have been closed to small business owners in the past. What’s So Powerful About the Combination?
Health Care CO-OPs and tax credits, by themselves, would still not be enough to make offering employer insurance feasible for many small businesses. The combination, however, of affordable insurance alternatives such as CO-OPs with tax credits, makes the situation more tenable for small businesses that operate at marginal profits in order to stay afloat as it is. What Businesses are Eligible for Health Insurance Tax Credits?
There are several requirements that must be met in order for employers to be eligible to receive tax credits for offering health insurance. According to Aetna, these conditions include:

  • Cannot employ more than 25 full-time equivalent employees in a taxable year
  • Employer must cover a minimum of 50 percent of the coverage cost for employees
  • Average annual wages cannot exceed $50,000
  • Qualifying agreement must be maintained

In 2010, the maximum tax credit was 35 percent. That number will change to a maximum of 50 percent in 2014. However, extremely small businesses with 10 or fewer full-time employees and average annual wages lower than $25,000 stand to benefit most from the small business tax credit says the Small Business Administration. The goal, of course, is to provide the greatest support and assistance to low and moderate income workers.
The IRS also points out that if you did not owe taxes during the year, you are eligible to carry the credit forward or back to other tax years. Information Worthy of Note
The National Federation of Independent Business, NFIB, points out that there are several limitations business owners need to be aware of with the health care tax credit. First of all, business must pay at least fifty percent of the health insurance premiums for their employees in order to qualify for the tax credit.
Second, most businesses that do receive the tax credit will not be awarded the maximum amount. Not only are small business owners excluded from the tax credit (and exclusion in the calculations of wages), but also the owners’ family members including children, foster children, siblings, step siblings, spouses, certain cousins, and in-laws.
Because figuring tax credits and understanding benefits such as these is so complex, the NFIB also highly recommends that business owners consult with their accountants before determining their best courses of action.

[View Article List]

TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

Filed Under: Doing business, IRS, Tax Law Changed

Primary Sidebar

Follow Us!

Follow Us on FacebookFollow Us on TwitterFollow Us on LinkedInFollow Us on E-mail

Search

Category

  • Best Business Practices
  • Doing business
  • Estate and Trusts
  • Individual Tax
  • Investment
  • IRS
  • Quickbooks
  • Retirement
  • Tax Law Changed
  • Uncategorized

Archive

  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • January 2018
  • December 2017
  • January 2017
  • December 2016
  • December 2015
  • October 2015
  • September 2015
  • July 2015
  • December 2014
  • September 2014
  • January 2014
  • December 2013
  • November 2013
  • September 2013
  • August 2013
  • June 2013
  • January 2013
  • December 2012
  • November 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • February 2012
  • January 2012

Recent Posts

  • Long-Term Investing 101
  • Saving for a Child’s Future
  • Retirement Savings Tips for Millennials
  • Tax Fraud vs. Tax Negligence: Understand the Difference
  • The 5 Most Common Small Business Accounting Mistakes

Recent Comments

    Copyright © 2013 · http://cpa-charlotte.com/blog