One of the biggest groups of consumers concerned about the rollout of Obamacare is small business owners and rightfully so. Most of the legislation in the Affordable Care Act is aimed at small businesses, so it is critical that they understand what the bill means for them and their employees.
A lot of small companies are concerned about the increased cost of providing health insurance for their employees, as it will take more away from their bottom line. The ACA has a tax credit set up that is designed to inspire businesses with 25 full-time employees to purchase health care coverage for their workers through the Small Business Health Options Program Marketplace.
Benefits of the Tax Credit
The benefits of the credit are designed to draw small companies out to purchase a plan through SHOP. They are numerous and can really help offset the cost of insuring their employees and relieve some of their tax burdens.
Small businesses pay a lot of taxes, so a tax credit that can help relieve that burden is very attractive to most business owners.
Those that are small enough to be tax exempt also benefit from this credit, as it could be paid out to them in the form of a refund. The only stipulation being that the refund cannot exceed the income tax withholding.
Qualifying for the Credit
There are a few requirements that your company must meet in order to qualify for this tax credit. Your business needs to be paying for 50 percent of the coverage for each one of your employees. The number of full-time workers you employ must be below 25. If you have two part-time employees, they count as one full-time worker.
Your employees are required to have average wages that are less than $50,000 annually. The health plan you provide for your employees must be one that was purchased through the SHOP marketplace.
The size of the credit you get is based on the size of your business. The smaller the company, the larger the credit you are eligible to receive.
In order to claim the credit you will need to use a Form 8941.
The whole idea beyond receiving this credit is to entice business owners to come on board with the ACA and purchase health insurance for their employees, which might have been something they had not done before. This is a win-win for businesses and employees because the company gets a tax break and workers get quality health insurance.
Since small businesses are always looking for a way to reduce their taxes, those that are already enrolled in a SHOP plan should make sure to take advantage of the tax credit. Companies not yet on board should consider looking into it to determine if it is advantageous for their operation.