By now, you’ve experienced plenty of heartburn on how or whether your company needs to comply with any portion of the Affordable Care Act, aka ObamaCare. This newsletter certainly cannot give you a primer on all 955 pages of the Act, but we can tell you about one key part that may apply to your business.
You may qualify for some level of the Small Business Health Care Tax Credit if you have no more than 25 full-time equivalent employees making an average of about $50,800 a year or less in 2014. Generally, to qualify for the credit, you must pay at least 50% of your full-time employees’ premium costs. The credit works on a sliding scale. The smaller your business is, the bigger your credit may be. Your credit could potentially be worth up to 50% of your contribution toward your employees’ premium costs (up to 35% for tax-exempt employers). Beginning this year, the credit can be claimed for up to two consecutive years.
If you did not owe tax during the year, you may be able to carry the credit back or forward to other tax years. Additionally, because the amount of the health insurance premium payments you make will be more than the total credit, you can still claim a business expense deduction for the premiums in excess of the credit. This allows you to obtain both a credit and a deduction for employee premium payments.
Small tax-exempt employers may benefit as well. Because the credit is refundable, even if you have no taxable income, you may still be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability. Contact us today to determine whether you are eligible for the Small Business Health Care Tax Credit or any of the Act’s other provisions.