Will The SHOP Delay Affect Tax Credit?

It seems like a Catch-22 situation. Due to a rule change, in 2014 you can only claim the federal “tax credit for small employer health insurance premiums” when you purchase qualifying health insurance through the government-established website, or “exchange.” Yet business enrollment on the exchange has been delayed until November of this year. How can you qualify?

Since the credit has been increased to 50% of the cost of health insurance premiums that you pay on behalf of your employees during 2014, the question is important to your tax planning.

The good news is you can still claim the credit when you purchase a qualifying health insurance plan. In fact, if your business is located in a state that operates its own insurance marketplace, the delay will not affect you at all.

In other states, you can buy a qualifying health insurance plan directly from an insurance company or through an insurance broker or agent, the way you always have. The difference is you’ll fill out an application to determine your eligibility for the premium credit.

Other rules for claiming the credit still apply, including employing fewer than 25 full-time equivalent workers with average annual wages of less than $50,000.

Give us a call. We’ll explain how the new rules work and help you decide what option offers the best tax advantage for your business.