Small Business Health Care Tax Credit is often a big concern for small business employers. Most commonly, business owners need to pay premiums for health insurance coverage for their employees. As a small company runner, you may also be eligible for a Small Business Health Care Tax Credit. The credit goes almost up to thirty-five percent of the qualified premiums you are liable to pay as a small business.
However, there is an enhanced version of this credit for Healthcare insurance-providing companies. The healthcare taxes will be effective from January 1, 2025. SG INC CPA can help you claim the credit as part of the general business credit on your company income tax return, moreover, since the health insurance tax credit will be less than the full amount of your premium payments.
How do Small Business Get Healthcare Plans?
Though you can also be eligible to claim a business expense deduction for the difference, you need to come under a Healthcare Insurance Plan. That is, either way, to claim a credit or a deduction for employees’ premium payments. SG INC CPA experts guide you through how you can get insurance plans for the health coverage of your employees with taxability credit eligibility.
Traditional Group Insurance Plans
The first and kind of most traditional way to get health insurance for your organization is through a group insurance plan. So, a group health insurance plan is a program. It’s also known as an employer-sponsored program. These are what you would get if you were going to work for a medium- to large-sized company.
You would be, you know, signing up with something like Blue Cross Blue Shield, and you would go and select three different options, or they would give you three to five different options. However, you should select the plan that is best for you.
That’s if you were an employee and you’re going to sign up. You want to offer that for your small business, so that would be signing up for one of these group health insurance programs. So it is possible to get that for your small business.
What Business Can Avail Group Insurance Plan?
One thing we run into is that you do need to have at least two people to have a group, and sometimes that does not include the owner. So, it can be a little tough as you’re just getting started. Thus, maybe you want to hire a super stellar employee right off the bat, and they need health insurance. This can be kind of a tricky thing to go straight from being a solopreneur directly into a group program.
How to Find a Group Insurance Plan?
There are options out there where you can get a group program for only two employees. However, it can be a little bit challenging. However, it can also potentially be quite expensive if you only have a couple of people because of the way that they’re going to price.
So, you’re going to look at the people in your census, which are the people your employees are on your list. That’s how it’s going to be based on their demographics, their age, and their gender, and then it’s going to price out a group plan based on just whoever’s in your mix.
How to Qualify For the Healthcare Tax Credit?
A business owner must meet three IRS-defined criteria to qualify for a small business healthcare tax credit.
- The first criterion is that the employer has to employ 24 or fewer full-time equivalent workers.
- The second criterion is that their overall wages should average less than $50,000 per annum.
- The third criterion for a healthcare insurance tax credit is that you must pay at least 50 percent of the cost of your employee’s healthcare coverage.
Bear in mind that the premium of the healthcare insurance plan must be for each of your employees. However, if you fail to meet all three of these criteria, then you can qualify for the tax credit on your employee’s healthcare insurance.
Maintain Your Full-Time Equivalent Employees (FTEs)
SG INC CPA elaborates on what full-time equivalent employees mean. The coolest way to explain the tax-pertaining FTE concept is to assess two half-time employees together. They can make one full-time equivalent employee or FTE.
So, if you have five part-time employees, our CPAs can tally up their combined hours worked over the course of a year and divide that result by 2080 hours. This will equal 40 hours per week. Our professional accountants will give you the number of full-time equivalent employees through FTEs you secure.
How Does a CPA Firm Help Secure Tax Credibility?
A reliable CPA firm will lead you to the point where you can secure tax credibility on your small business healthcare insurance. You can research for it with other local business owners to see if something like that might be available. You can also use something like a PEO. We advise you to consider Form 8941 for a tax credit on the employees’ health insurance tax.
You can also partner with PEO from an organization that can help you get access to larger negotiated contracts on group programs as a small employer. However, whereas we stand as an all-inclusive CPA tax assistance firm, our qualified CPAs assess you to gain insight on how to prepare your small business health insurance tax credit.
We Calculate Your Average Annual Wages
The first pragmatic approach is to figure out the average annual wages of your permanent employees. Our tax assessment flourishes the mechanism in a pretty easy way. For instance, if a business owner goes to pay a total of $1 million salary disbursement as annual wages, he will hold five FTEs because the average annual wage you pay is equal to $20,000.
Finally, business entrepreneurs need to be sure that they are paying at least fifty percent of the cost of coverage for their employees. Please also note that these do not include your employees’ families and the number of employees registered overall.
Operation of Calculation on the Tax Credit
Now, let SG INC CPA explain how we calculate your tax credit. The tax credits on small business healthcare insurance work on a sliding scale. This implies that the smaller the business is, the bigger the credit will be. As a case study, let us further make it understandable that from tax years 2020 through 2023, the maximum credit is 35 percent of premiums paid for small business owners.
While a 25 percent tax credit exempts employers such as charities. For tax years beginning in 2024 or later, there will be tax regulations towards the credit. The maximum credit will likewise increase up to 50 percent of premiums paid for small business owners. This way, 35 percent of premiums are paid for small tax-exempt workers.
Filing Claim for the Tax Credit
Our tax assistance will steer you to be eligible for the small business healthcare tax credit. SG INC CPA guides small business employers on how to pay premiums on behalf of employees. We also provide guidelines on how you can affiliate with a qualified health plan. The plans must go through a small business health options program or SHOP marketplace. The small business health insurance tax credit will also benefit eligible employers for two consecutive taxable years.
Final Words
Small companies can apply for tax credits on their employee’s healthcare insurance plans. However, if a small business company does owe tax during the year, it can carry the credit back or forward to other tax years. SG INC CPA is a helpful tax service in Texas and California, we offer virtual tax services to small business companies around the State.
Our tax analysts can get you qualified for a small business healthcare tax credit to carry the credit back or forward. CPAs here with us incur the possibility for a tax-exempt employer so that you may be eligible for a refundable credit.