Can Health Insurance be Reimbursed as a Business Expense?

Can Health Insurance be Reimbursed as a Business Expense?

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Small business owners are entitled to make deductions regarding their health insurance when filing their taxes.  The Affordable Care Act, also known as Obamacare, has made it easier for small business owners to deduct the cost of health insurance premiums from their taxes.

Starting in 2014, small business owners who purchase health insurance through the Small Business Health Options Program (SHOP) Marketplace are eligible for a tax credit worth up to 50% of the cost of their premiums.

In order to qualify for the tax credit, businesses must have fewer than 25 full-time equivalent employees and must pay an average wage of less than $50,000 per year.

In addition to the tax credit, small business owners can deduct the cost of health insurance premiums for themselves and their employees on their taxes. This deduction is available regardless of whether the business owner purchases health insurance.

In this article, we’ll explain everything you need to know about health insurance as a business expense.

Can Health Insurance Serve as a Tax Deduction?

The cost of health insurance premiums can be deducted from your taxes as a business expense. This deduction is available regardless of whether you purchase health insurance through the Small Business Health Options Program (SHOP) Marketplace or on your own.

In order to qualify for the tax credit, businesses must have fewer than 25 full-time equivalent employees and must pay an average wage of less than $50,000 per year.

In addition to the tax credit, small business owners can deduct the cost of health insurance premiums for themselves and their employees on their taxes. This deduction is available regardless of whether the business owner purchases health insurance.

What is the Small Business Health Care Tax Credit?

The Affordable Care Act, also known as Obamacare, has created a tax credit for small business owners who purchase health insurance through the Small Business Health Options Program (SHOP) Marketplace.

The tax credit is worth up to 50% of the cost of premiums and is available to businesses that have fewer than 25 full-time equivalent employees and pay an average wage of less than $50,000 per year.

To claim the tax credit, business owners must file Form 8962 with their taxes.

What are the Benefits of the Small Business Health Care Tax Credit?

The main benefit of the small business healthcare tax credit is that it can help offset the cost of health insurance premiums. This can make health insurance more affordable for small businesses. 

In addition, the tax credit is available for businesses that have fewer than 25 full-time equivalent employees. This means that even small businesses can benefit from credit.

Finally, the tax credit is available regardless of whether the business owner purchases health insurance through the SHOP Marketplace or on their own.

What are the Drawbacks of the Small Business Health Care Tax Credit?

There are a few drawbacks to the small business healthcare tax credit. First, the credit is only available to businesses that have fewer than 25 full-time equivalent employees and pay an average wage of less than $50,000 per year.

This means that many small businesses will not be eligible for the credit. In addition, the credit is only available for businesses that purchase health insurance through the SHOP Marketplace.

Finally, the credit is only worth up to 50% of the cost of premiums. This means that business owners will still have to pay at least 50% of the cost of their health insurance premiums even if they qualify for the credit.

How to Deduct Health Insurance Premiums on Your Taxes

If you purchase health insurance on your own, you can deduct the cost of your premiums from your taxes. This deduction is available regardless of whether you qualify for the small business healthcare tax credit.

To deduct your health insurance premiums, you must file Form 1040 with your taxes. On Form 1040, you will list your health insurance premiums as an itemized deduction.

You can deduct the cost of health insurance premiums for yourself, your spouse, and your dependents. The total amount of your deduction cannot exceed 10% of your adjusted gross income.

For example, if your adjusted gross income is $50,000, you can deduct up to $5,000 of health insurance premiums on your taxes.

Is There a Limit on How Much You Can Deduct?

There is a limit on how much you can deduct for health insurance premiums. The total amount of your deduction cannot exceed 10% of your adjusted gross income.

For example, if your adjusted gross income is $50,000, you can deduct up to $5,000 of health insurance premiums on your taxes.

What if You Don’t Itemize Your Deductions?

If you don’t itemize your deductions, you can’t deduct the cost of your health insurance premiums. This is true even if you would have been eligible for the small business healthcare tax credit.

To deduct the cost of health insurance premiums, you must itemize your deductions on Form 1040. If you don’t itemize your deductions, you can’t deduct health insurance premiums.

How to Get the Small Business Health Care Tax Credit

If you’re a small business owner who is interested in claiming the small business healthcare tax credit, there are a few things you need to do.

First, you need to purchase health insurance for your business through the SHOP Marketplace. You can’t claim the credit if you don’t purchase health insurance through the SHOP Marketplace.

Second, you need to file Form 8962 with your taxes. This form is used to claim the small business healthcare tax credit.

Finally, you need to make sure that you have all of the necessary documentation. This includes documentation of your health insurance premiums and your employees’ wages.

Your Ability to Reap These Benefits Will Depend on Your Business Structure

Sole proprietors, partnerships, S corporations, and other types of businesses can claim the small business health care tax credit. However, the way that the credit is calculated differs depending on the type of business.

For example, sole proprietors can claim the full amount of the credit. Partnerships and S corporations can only claim a portion of the credit. The exact amount that can be claimed depends on the number of employees and the number of wages paid by the business.

Finally, C corporations are not eligible for the small business healthcare tax credit. This is because they are not required to pay taxes on their income.

The Small Business Health Care Tax Credit Can Be Worth Up to 50% of Your Health Insurance Premiums

The small business healthcare tax credit can be worth up to 50% of the cost of your health insurance premiums. However, the amount of credit depends on a number of factors, including the number of employees and the number of wages paid by the business.

To qualify for the full 50% credit, you must have fewer than 25 employees and pay an average salary of less than $50,000 per year. If you have more than 25 employees or pay an average salary of more than $50,000 per year, you will only be eligible for partial credit.

The amount of the credit also varies depending on whether you purchase health insurance through the SHOP Marketplace. If you purchase health insurance through the SHOP Marketplace, you may be eligible for a larger credit.

Conclusion

The small business healthcare tax credit can be a valuable benefit for small business owners. If you’re a small business owner, it’s important to understand how the small business health care tax credit works.

This credit can save you a significant amount of money on your taxes, but only if you take the time to learn about it and apply for it correctly.

 

If you want accurate bookkeeping for your business, consider hiring a reputable accounting firm. One of the trusted accounting firms in Florida is Swiftbooks, LLC. Call 786-204-2881 today to help your business keep its financial records straight!

Further Reading

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