The Advantages of Obamacare for Small Small Businesses

Small businesses who employ less than 50 full-time equivalent people are not required to purchase health insurance for their employees. Yet, many small small businesses (2 or more) can realize a savings by buying their insurance through the Small Business Health Options program (SHOP).

A client of mine are a husband and wife who operate a small company that employs several part-time employees. Their combined income is too much to qualify for premium assistance under the Affordable Care Act. The husband came to me with an unfortunately common complaint that his insurance had gone up compared to what he used to have. He didn’t care about or need the new benefits required under Obamacare (at least not yet – see no annual or lifetime limits on healthcare). What he didn’t know was that at least for the next two years, their small business could get insurance through the SHOP marketplace and that, depending on their income, as long as the average of their salaries was less than $50,000 a year, they could receive up to a 50% tax credit for their insurance cost. This brought down the cost of their health insurance markedly.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees (which can be a husband and wife). You must also have fewer than 25 full-time equivalent employees (Basically, two half-time workers count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.). Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.  If you are a small business employer, you may be able to carry the credit back or forward.You must use Form 8941, Credit for Small Employer Health Insurance

As a small business they can also receive a tax benefit with Health Savings Accounts (a deduction for contributions of up to $3,300 for singles and $6,550 for family coverage, with an extra $1,000 annually if you’re age 55 or older).  Other possible tax savings can be found in Flexible Spending Arrangements, Health Reimbursement Arrangements (see http://www.irs.gov/publications/p969/ar02.html)

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