The Small Business Health Care Tax Credit

Small Business Health Care Tax Credit

06 Sep The Small Business Health Care Tax Credit

What is it?

A small employer is eligible for the credit if (a) it has fewer than 25 full-time equivalent employees, (b) the average annual wages of its employees are less than $50,000 (adjusted for inflation beginning in 2014), and (c) it pays a uniform percentage for all employees that is equal to at least 50% of the premium cost of employee-only insurance coverage. For tax years beginning in 2014 or later, the employer generally must contribute toward premiums on behalf of each employee enrolled in a qualified health plan (QHP) offered by the eligible small employer through a Small Business Health Options Program (SHOP Marketplace) established as part of the Affordable Care Act to qualify for the credit. The tax credit is worth up to 50% of employer’s contribution toward employees’ premium costs (up to 35% for tax-exempt employers).

Why is it important for small business owner to consider?

For small business owners, they are usually the first full time employees of the company.  If their household income level plus their share of company profit exceed 400% of poverty level, then they will not be qualified for Obamacare Advanced Premium Tax Credit.  In other words, they need to pay full health care premium for themselves and their families.  Also since personal health care premium cost is a non-deductible expense in their company’s tax return, their healthcare premium cost is non tax-deductible.

However, if the company sets up the above healthcare benefits to their full-time employees, then the healthcare cost will become a deductible expense and reduce the company’s tax impact.  In addition, as the small business can claim the Small Business Health Care Tax Credit, it will further reduce the owner’s tax payment in the 1040 tax form because the Tax Credit will offset part or whole of his tax liability.

For how to enroll into the SHOP Marketplace, and to begin enrolling full-time employees into their company group health care plan, and how to claim the Small Business Heath Care Tax Credit, please contact Mr Lau at 407-401-9768 or email to .

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