As part of the implementation of the new health care reform laws, Ohio small businesses providing group health insurance for their employees can write off a portion of their premium payments.

The Affordable Care Act allows employers who pay at least half the cost of single health insurance coverage premiums for their employees to claim the credit.

Employers must purchase group health insurance through what the I.R.S. deems a qualifying arrangement. In layman’s terms, this means that health insurance plans must be purchased from an accredited health insurer or HMO type organization.

Employee Wage and Salary Requirements

In order for a small business to qualify for the new tax credit, full time employees must meet certain income restrictions. The average wage for all full time employees must be less than $50,000 per person per year.

If the business has a higher median average than $50,000 for its full time employees, then the credit cannot be claimed in the year 2010 (or beyond) unless Congress increases the allowable amount in the future.

Allowable Number of Small Business Employees

The tax benefit will only be available to small companies with low and moderately salaried workers who employ less than 25 full time employees. Groups exceeding this limit are ineligible for the tax credit.

Eligibility for the tax credit will be based on the number of full time employees, not the overall number of employees. Small businesses with several part time hires may still be able to qualify for the deduction assuming the aforementioned salary requirements can be met.

Maximum Percentage of Health Insurance Premiums Eligible for Small Business Tax Credit

The maximum allowable credit is 35% of premiums paid by an eligible for profit small business. Non-profit and tax exempt small businesses are afforded a maximum of 25% of premiums paid by the employer.

Once an employer reaches ten full time employees, the tax credit will dissipate based on a stated formula. The credit also is reduced fractionally once the average salary reaches $25,000 or greater for each employee.

Working with H&R Block, Anthem Blue Cross Blue shield has created an online calculator that can help small companies calculate their possible deduction amount. This is helpful for those already offering health insurance to their employees as well as those who are considering coverage.
(Click here to view the calculator.)

Allowable Health Insurance Premium Deductions

Employer funded major medical insurance covering a wide variety of medical conditions counts as a qualifying expense each year. Ancillary benefits that are limited in scope such as dental and vision plans can also be claimed by the employer.

It is unclear based on the I.R.S. website as to whether group long term care, disability, and/or life insurance premiums will be eligible for the tax credit. Additionally, there is no mention of employer contributions to HSA, FSA or HRA accounts. These may be issues that will require clarification from an accountant.

Employers can learn more by reading the frequently asked questions section at the I.R.S website.

Small Business Group Health Insurance Summary

The small business health insurance tax credit will be most beneficial for groups with 10 or less full time employees averaging less than $25,000 in annual salary. The tax credit is designed as an incentive for small business employers to provide medical coverage and as a stopgap measure until new laws take effect in 2014.

Few groups may qualify for the maximum deduction, but some inevitably will. Should Congress ease the eligibility requirements in the future, more small businesses in Ohio can take advantage of this new law.

Contact Us to Compare Quotes

Hyers and Associates offers small business health insurance quotes from several carriers such as Aetna, Anthem, Assurant, Humana, Medical Mutual and United Healthcare.

Category: Group Health Insurance

Last updated on December 28th, 2017

Ohio Small Business Health Insurance Tax Credit