Tax Implications of the Affordable Care Act on Small Businesses

Written by Eddy Hood

The Affordable Care Act, signed into law in March 2010 and fully implemented in 2014, has had a major effect on small businesses. While the main purpose of the law was to make health care more affordable for people in the United States, the changes have caused a lot of confusion. It seems everyone has been affected by these changes in health care, including health care providers, health insurance carriers, and small business owners. Even individuals have been affected and must now have health insurance or pay a penalty tax.

Due to the changes implemented because of the Affordable Care Act, small business owners must adjust the way they do certain things. Two areas that were affected are health insurance and group benefits. Thanks to the implementation of Affordable Care Act taxes, bookkeeping has also been largely affected. If you are a small business owner who is still trying to make sense out of the tax implications of the Affordable Care Act, Ignite Spot is here to help.

Affordable Care Act: Small Business Implications

How the affordable care act affects your small business is largely dependent on the number of employees you have. Some businesses may be eligible for a tax credit as a way to help make health care coverage more affordable. In order to qualify businesses must have all of the following:

1. Less than 25 employees
2. Average annual wages paid out are less than $50,000
3. Contribute at least 50 percent towards their employees' health insurance premiums

Small business owners can buy coverage for their employees through a program called Small Business Health Options Program (SHOP). Employers with up to 50 employees can get coverage through SHOP. Employers with more than 100 full-time employees may be required to pay an assessment if they do not offer health insurance or if the coverage offered is not affordable.

More Small Business Affordable Care Act Implications

When it comes to taxes, there are other things small business owners will want to keep in mind. One of these is the tax deductibility of premium contributions. Generally speaking, any premium contributions an employer makes for their employee, their employee's spouse, and the employee's dependent, are considered business expenses that are 100 percent deductible. Employers may also deduct medical reimbursements, including medical expenses and premiums their employee pays for their own health insurance coverage.

Getting Help for Affordable Care Act Taxes

Business owners have been affected by the changes that were put in place by the Affordable Care Act. For small business owners, there are programs and tax incentives that make it easier to offer employees health insurance, but it can all be a little confusing. Many small businesses are looking to outsourced accounting and tax preparation services for help. Let Ignite Spot help with all of your Affordable Care Act tax questions. Our team of seasoned accounting experts can help you increase profits and grow your small business. To find out more about the bookkeeping services our firm offers, download our pricing guide and contact us online or by phone today!

Learn More About Our Tax Services

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4. The Guide to Small Business Tax Preparation and Deductions
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