Taxes and Healthcare - Small Business Health Care Tax Credit



    As is true of life in general, the world of accounting and taxes is constantly changing, and we need to adjust in order to keep up our awareness and understanding.  These changes mean that from one year to the next, while our business or financial situation may not change, the consequences for us may be very different.  However, that's not always a bad thing.  For example, if starting in tax year 2014 you employed 25 or fewer full-time employees, you may be eligible for the Small Business Health Care Tax Credit.

    To qualify for the credit, a small business must buy coverage through the shop (Small Business Health Options) Marketplace, pay at least half of their employees' premiums, and pay an average wage of less than $50,000 per year.  For 2014 the tax credit for a small business increases to as much as 50% of the premiums paid by employers.  For tax years 2010-2013 the maximum was only 35%.  The credit can be claimed for 2 consecutive years and can be carried over to future tax years.  Since the health insurance payments will come to a total greater than the tax credit, a business can still claim an expense deduction related to premiums for paid for employees. Being able to receive a credit and claim an expense for the same item certainly works out to the benefit of small businesses.  What do you think?

    In the next blog post, we will discuss how these changes effect tax exempt small businesses, and what to do if you did not claim this credit for tax year 2014. 

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