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The Affordable Care Act Tax- Are You Affected?

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The Affordable Care Act Tax Are You Affected Daniel Stoica Accounting ProfessionalYou might be impacted by the Affordable Care Act tax provisions, whether you are a small business owner or an individual.

President Obama signed The Affordable Care Act into law on March 23, 2010. The goal of the health reform is to guarantee that all Americans have access to affordable health insurance. The law will affect nearly every American, including those who are on government run health insurance, people who pay for their own insurance, small businesses, seniors on or eligible for Medicare, and large employers who offer medical coverage.

The Affordable Care Act contains several tax provisions that will begin as different areas of the health reform legislation are put into action. Action on the health reform law is the duty of the Department of Health and Human Services. The purchase of health insurance is included in many worker’s jobs and tax-related benefits. Almost all of the new regulations involve the involvement of the Department of Labor and the IRS.

Below is a list of some of the tax-related effects of the Affordable Care Act that have been decided. For the complete list, please visit www.irs.gov.

Employer-Provided Health Coverage is not taxable
Starting in the 2011 tax year, the Affordable Care Act requires your employer to report your health insurance coverage on your W-2. This is only for your information. It is there to let you know the value of your health care benefits. The amount doesn’t affect your tax liability because the cost of your employer’s contribution will not be included in your income and is not taxable.

Small Business Health Care Tax Credit
If you own a small business, this credit will help you to afford coverage of your employees. It is for businesses with low to moderate income workers. The credit encourages small business employers to offer health insurance coverage for the first time or keep coverage it may already have. The credit is available to small business employers that pay at least half the cost of coverage for their employees.

To qualify for the small business tax credit you must meet the following eligibility rules:
-Provide health care coverage: You must cover the cost of at least 50% of health care coverage for some of your workers based on the single rate.
-Company size: You must have fewer than 25 full time employees. An employer with fewer than 50 part time employees may be eligible.
-Average annual wage: You must pay an average annual wage of less than $50,000.

If you are eligible, the credit is worth up to 35% of your premium costs. This rate increases to 50% (35% for tax-exempt employers) on January 1, 2014. The credit decreases slowly for companies with average wages between $25,000 and $50,000, and for companies with 10 to 25 full time employees.

Health Coverage for Older Children
Health care coverage for your children under the age of 27 is now tax-free. It applies to a variety of work place and retiree health plans. This change became effective in September of 2010 and allows employers with cafeteria plans to allow employees to make pre-tax contributions to pay for this benefit. This tax benefit also applies to people who are self-employed to also qualify for the self employed health insurance deduction on their federal income tax return.

If you are uncertain about any details of the Affordable Care Act tax, it is a good idea to talk to a tax professional. He or she can assist you in determining which one will bring the most tax benefits for you.

Daniel Stoica Accounting Professional

  • Anonymous

    I am for and against the health reform since I’m pretty much self-employed, but I need insurance.

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Daniel Stoica Consulting, Accounting and Tax Professional based in Roscoe, Illinois, U.S.A. Serving Local, National, and International Clients